The Government could be facing a bill of up to €300 million after the European Court of Justice ruled yesterday that the pensions of former Waterford Crystal workers must be protected.

Industry sources said it was now almost inevitable that the Government would introduce a levy on other defined benefit schemes to cover the cost of creating a fund to finance the pensions of unprotected workers in the future.

There is concern in the sector that additional costs will further undermine the viability of defined benefit schemes in the private sector, which provide retirement benefits for nearly 200,000 people.

Pension entitlements
Ten former employees of Waterford Crystal, which went into receivership in January 2009, took a case against the State for the loss of their pensions. At the time of the company's insolvency, the workers were told they would receive only between 18 per cent and 28 per cent of their full pension entitlements.

The ECJ found that Ireland was “in serious breach” of its obligations to protect workers and that Waterford Crystal employees were entitled to protection under the 2008 EU Insolvency Directive. The judges ruled that offering retirees half of what they had been promised under a defined benefit scheme did not amount to protection by the State.

The court also dismissed arguments by the State that the economic situation in Ireland justified a lower level of protection than might otherwise have been required. The issue will now go back to the High Court in Ireland to decide what level of cover the Government will have to provide.

Pensions Ombudsman Paul Kenny said the ECJ ruling could cost the Government millions if full cover is provided to the 1,700 former workers.

“It would appear to be a charge on the State. The Government would have to pay.”

The Waterford Crystal schemes had assets of €130 million and liabilities of €240 million when they were wound up.

Mr Kenny said he had no doubt the other workers at Waterford Crystal would apply for their case to be dealt with in the same way, adding that members of other pension schemes whose employers became insolvent following the 2007 Carol Robins case could also benefit from the ruling.

English woman Carol Robins successfully challenged the UK government after a company’s insolvency left her with only 49 per cent of her pension. The UK government restored her pension to 90 per cent following the case.

Gary Byrne, the solicitor who represented the Waterford Crystal workers, said he was hopeful he could achieve up to 89 per cent of their pension entitlements, since this was the level secured by the workers' counterparts in Britain.

'Unfair of the court'
"The Wedgwood guys got 89 per cent of their pension entitlements and the Waterford Crystal guys got nothing. It would be unfair of the court to give them 51 per cent now."

The Byrne Wallace solicitor said it was “regrettable” the workers had to take the case to the European Court of Justice to win the protection, considering that the EU requirement for pension protection has been in place since 1980.

John O'Connell, founder of financial advisory firm Trident Consulting, said the ECJ ruling only applies where both the scheme and employer are in wind up and as such the potential number of cases affected was likely to be very small.

Tánaiste Eamon Gilmore said that as the matter remained sub judice he could not comment.

Already, about 80 per cent of defined benefit schemes are in deficit and are being obliged by the pensions regulator to restructure in ways that generally mean reducing retirement benefits and/or increasing employee contributions.