Opinion of Advocate General Kokott delivered on 26 April 2018.

• Jurisdiction: European Union
• Celex Number: 62017CC0017
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2018:287
• Date: 26 April 2018
• Docket Number: C-17/17
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 26 April 2018 (1)

Case C‑17/17

Grenville Hampshire

v

The Board of the Pension Protection Fund,

Interested party:

Secretary of State for Work and Pensions

(Request for a preliminary ruling from the Court of Appeal (United Kingdom))

(Request for a preliminary ruling — Protection of employees in the event of the insolvency of their employer — Article 8 of Directive 2008/94/EC — Protection of the immediate and prospective entitlement of employees to old-age benefits — Supplementary occupational pension scheme — Minimum guarantee — Direct applicability)

I. Introduction

1. The present request for a preliminary ruling in the field of social policy concerns the protection of employees in the event of the insolvency of their employer. Specifically, it relates to the fate of claims under an occupational pension scheme set up by an employer in the event of insolvency. Such claims are covered by Article 8 of Directive 2008/94/EC, (2) which requires Member States to take measures to protect the interests of employees in respect of their rights to old-age benefits in the event of the insolvency of the employer. The Court clarified this responsibility for providing protection in its judgments in Robins and Hogan to the effect that employees must retain at least 50% of their entitlement to old-age benefits in the event of the insolvency of their employer. (3)

2. In the present case the focus is once again on the transposition of the directive in the United Kingdom, which provides for an absolute cap on claims for compensation to which employees are entitled in the event of the insolvency of their employer. The contested national rules affect above all employees whose entitlement under a supplementary occupational pension scheme is already relatively high. In the case of the applicant in the main proceedings, Mr Hampshire, those rules result in a loss of more than 67% of his old-age pension entitlement.

3. Against this background, the question arises as to the extent and practical operation of the minimum guarantee developed by the Court for the accrued pension entitlement.

4. The question also arises as to the possible direct applicability of Article 8 of the directive in the present case. That provision is relatively broad in its wording but at the same time has been given extensive clarification in the Court’s case-law.

II. Legal framework

A. EU law

5. The framework of this case in EU law is defined by the rules of Directive 2008/94 on the protection of employees in the event of the insolvency of their employer (‘the Directive’). According to recital 3, the Directive seeks to protect employees in the event of the insolvency of their employer, in particular in respect of payment of outstanding claims.

6. Article 8 of the Directive provides:

‘Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer’s undertaking or business at the date of the onset of the employer’s insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors’ benefits, under supplementary occupational or inter-occupational pension schemes outside the national statutory social security schemes.’

7. Reference should also be made to Article 12(a) of the Directive, which contains the following provision:

‘This Directive shall not affect the option of Member States:

(a) to take the measures necessary to avoid abuses;

(b) …’

B. National law

8. Directive 2008/94 was transposed in the United Kingdom, in so far as the protection of employees’ rights to old-age benefits is concerned, mainly by the Pensions Act 2004.

9. The Pensions Act 2004 establishes a statutory Pension Protection Fund (‘PPF’). In the event of the insolvency of an employer, the PPF assumes responsibility, subject to certain conditions, for employees’ claims under a supplementary occupational pension scheme. In order to fund this task, it imposes a levy on all eligible supplementary occupational pension schemes. Furthermore, if responsibility is assumed, it takes over the remaining assets of the scheme in question. The Board of the Pension Protection Fund (‘the Board’) administers the PPF.

10. By virtue of section 127(2) of the Pensions Act 2004, one of the conditions for the PPF assuming responsibility is that at the time when insolvency occurs, the value of the assets of the scheme concerned is less than the amount of the protected liabilities.

11. However, the full pension claims of all employees in the supplementary occupational pension scheme are not regarded as ‘protected liabilities’ within the meaning of that provision, but only the compensation entitlements accruing to them under the Pensions Act 2004 (‘PPF compensation’). The amount of PPF compensation payable in each case is determined by the Board following insolvency during an ‘assessment period’.

12. For employees who have already attained their pension scheme’s normal pension age at the time of the insolvency of the employer, section 162 of the Pensions Act 2004 does not provide for a reduction of their claims. On the other hand, employees who have not yet attained the normal pension age at the time of the insolvency are entitled to only 90% of the value of their accrued entitlement. In addition, their claim is subject to the cap under Schedule 7, paragraph 26 of the Pensions Act 2004 which is at issue in the main proceedings.

13. The annually applicable cap for employees in a certain age group is set by the PPF. Although the level is increased each year according to the general trend in earnings, benefit recipients to whom the cap applies receive throughout their lifetime the amount which was determined for the year in which they were first paid benefits by the PPF.

14. Furthermore, Schedule 7, paragraph 28 of the Pensions Act 2004 provides for an inflationary adjustment with an upper limit of 2.5% p. a. for the maximums initially defined; however, no provision is made for adjustment of the maximum based on that provision in respect of compensation attributable to employment prior to 6 April 1997.

15. If, after concluding its assessment and calculation of the total protected liabilities to be serviced, the PPF finds that there were sufficient assets in the supplementary occupational pension scheme at the relevant time at least to pay benefits to employees to the level of the PPF compensation, it must determine pursuant to section 154 of the Pensions Act 2004 that it is not appropriate for the PPF to assume responsibility.

16. In this case, the supplementary occupational pension scheme is wound up outside the PPF. The supplementary pension scheme in question is then required to grant employees PPF compensation from the remaining funds. Under section 154(7) of the Pensions Act 2004, the supplementary occupational pension scheme is subject to the directions of the PPF.

17. As soon as the valuation by the PPF has taken place, it becomes binding under section 145 of the Pensions Act 2004, subject to appeal.

III. Facts, main proceedings and request for a preliminary ruling

18. Grenville Hampshire, the appellant in the main proceedings, was employed from 1971 to 1998 by Turner & Newall plc (‘T&N’). Throughout his period of employment he was a member of the T&N supplementary occupational pension scheme. In 1998 he took retirement at the age of 51, when his pension entitlement was set by the trustees of the T&N pension scheme at GBP 48 781.80 per annum before tax, with an annual increase of at least 3%. Following a takeover by the US undertaking Federal Mogul, an insolvency application was filed for T&N, now Federal Mogul, in the United States in 2001. Subsequently, on 10 July 2006, the PPF opened the assessment in the United Kingdom concerning the takeover of the supplementary occupational pension scheme.

19. After the assessment had been concluded, the PPF found on 19 September 2011 that, as at 10 July 2006, sufficient funds were available in the T&N pension scheme to grant at least PPF compensation to the remaining employees throughout their lifetime. The amount of relevant PPF compensation for Mr Hampshire was set at GBP 19 819 per annum before tax, as he had not yet attained the normal pension age for the T&N pension scheme in 2006 and was thus subject to the statutory cap.

20. In addition, it was not envisaged that that amount would be subject to any inflationary adjustment because Mr Hampshire’s employment was largely prior to 6 April 1997. Compared to his entitlement of GBP 60 240 per annum, which Mr Hampshire would have received in 2006 if his employer had not become insolvent, this represents a reduction of 67%, a figure set to rise.

21. For this reason, Mr Hampshire and 15 other former employees of T&N who are affected by similar reductions first sought application of the review mechanism under the Pensions Act 2004 in respect of the PPF valuation and subsequently appealed against the decision confirming that valuation, relying on Article 8 of Directive 2008/94.

22. The PPF considers, however, that the Court’s case-law on Article 8 of the Directive only requires Member States to have introduced systems of protection which guarantee all employees in a supplementary occupational pension scheme compensation of at least 50% of the value of their accrued entitlement on average, but not each individual employee.

23. The proceedings are now before the Court of Appeal (United Kingdom). By order of 26 July 2016, received at the Court of Justice on 16 January 2017, the Court of Appeal stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling pursuant to Article 267 TFEU:

1. Does Article 8 of Directive 80/987/EEC (now superseded by Article 8 of Directive 2008/94/EC) require Member States to ensure that every individual employee...