Cantillon: Element Six case will cause ripples throughout the indursry
Two key issues in High Court pensions case will cause disquet
More than 100 workers are claiming about €50 million – the deficit they allege the trustees should have made sure was resolved before the pension scheme was wound down
When pension fund members start suing their trustees, it is a clear indication of the deep rupture in the formerly paternalistic relationship between workers and their employer. Trustees, after all, are supposed to be independent and to act in the interest of members in managing the pension promise of employers.
While not unprecedented, the action today in the High Court where workers at industrial diamond group Element Six will, therefore, attract attention across an increasingly troubled sector.
In the Element Six case, more than 100 workers are claiming about €50 million – the deficit they allege the trustees should have made sure was resolved before the pension scheme was wound down.
The courts will decide but, even at the outset, there are two issues that will cause ripples of disquiet throughout the industry.
First, it was reported over the weekend that the chairman of the trustees was finance director of the company. While there is nothing to expressly rule out someone holding both roles, it seems at best inadvisable, considering the potential conflicts of interest that could arise – especially in a situation where the pension scheme is being wound up.
It has also emerged that the company, while not party to the litigation, has provided an indemnity to the trustees, covering any damages that may be awarded should the workers’ claim be successful.
While this will come as a relief to trustees who can be held personally liable for damages in such cases, it will do nothing to increase the faith of pension scheme members that trustees are independently acting in the interests of beneficiaries in the many defined benefit, or final salary schemes, that are confronting the real possibility of being wound up – in a position where members will lose an often significant share of their retirement benefits.