ASW workers have lost their pensions

Pensions minister Malcolm Wicks was served with a writ on Monday by the Amicus and ISTC trade unions.

About 800 Workers from the Allied Steel and Wire (ASW) steel company in Cardiff and Sheerness, Kent lost a large part of their pensions when their firm folded.

The unions are to take the government to the European Court of Justice claiming it failed to properly implement an EU Directive which would have offered protection to the workers.

'Appalling plight'

A spokesman for the Department for Work and Pensions said it would be "inappropriate to comment" on any legal proceedings.

But she said the government was "very concerned about workers" whose schemes had wound up.

Although the government didn't want to give "false hope", she said, it was "considering all proposals".

When ASW collapsed in July 2002, workers not only lost their jobs but most of their pension too.

Some people had worked for the firm for 30 years and now face an impoverished retirement.

Amicus spokeswoman Catherine Bithell told BBC News Online: "The plight of these pensioners is appalling we will do whatever it takes to get justice."

The union's case is based on article eight of the European Insolvency Directive of 1980 which, it says, successive governments have failed to implement in the UK.

The directive requires member states to protect pension benefits in situations of insolvency.

"We have been told by our lawyers that we have a strong case to claim compensation from the government," Ms Bithell said.

The case is due to be heard next February but the unions are not expecting a decision before autumn 2004.

No compensation

The Department of Work and Pensions has long maintained it has fulfilled its obligations to the workers and has refused to pay compensation.

The government announced its plans for pension reform in a Green Paper last December.

A key component of the government's plans is an insurance scheme which would protect workers pensions if their firm folded bringing the pension fund down with it.

But the insurance scheme will not be able to help workers who have already lost their pension.