The Pension Protection Fund (PPF) is working on increasing compensation payments “as quickly as possible” for those affected by the Court of Justice of the European Union (CJEU) ruling last month.
The lifeboat announced today, 15 October, that it would be writing to capped members who were affected by the ruling, while working closely with the Department for Work and Pensions to ensure its approach is in line with future legislation changes.
In September, the CJEU ruled that the PPF must pay at least 50 per cent of members pensions entitlement to individuals whose employers have fallen into the fund after its employer became insolvent.
Delivering an update on the ruling, the PPF said: “We have started to write to capped members who we believe are affected by the ruling. This is to confirm our records, because we do not have all the data we need to calculate the increase due.
“We will be writing in tranches over the coming weeks, so members who believe they are affected, but do not receive a letter immediately, do not need to contact us.”
Prior to legislation coming into place, the PPF said that where compensation levels are below 50 per cent it will ensure the headline value is at least equal, which it anticipates will be a one off change.
It also said it will be increasing the Financial Assistance Scheme (FAS) assistance to at least 50 per cent.
Royal London director of policy, Steve Webb, said: “It is right and proper that the PPF is putting in place plans to increase the pensions of those who have lost the most when their employer went bust. Given the pressure on parliamentary time, it could be months, if not years, before legislation could be passed to change the rules on PPF compensation.
“In the meantime, many of these workers would have to get by on far less than they had originally expected. It is good to see the PPF moving ahead and it is to be hoped that comprehensive legislation to address this anomaly will not be far behind.”
Currently, employees who have not yet reached pension age are entitled to up to 90 per cent of their accrued benefits, but are not offered inflationary increases, for this to fall below 50 percent would be illegal, the CJEU ruled.
The PPF initially estimated the ruling to increase its liabilities by 1 per cent. It is currently 122.8 per cent funded and has a surplus of £6.7bn.
Grenville Hampshire initially brought the case to the Court of Appeal in July 2016, claiming that his pension was cut by 67 per cent when his company scheme was transferred into the PPF.