Pensions Minister Steve Webb has announced that the Pension Protection Fund (PPF) compensation cap is to be reviewed over fears that the current cap for those who have not reached scheme pension age is acting in a “penal way”.

For members who have already reached Normal Pension Age (NPA) when their scheme fails, PPF pays 100 per cent of their pension without limit. For those under NPA, PPF pays only 90 per cent with a cap of around £30,600 at age 65. The cap becomes progressively less for members at younger ages.

Webb stated that he has become concerned that the cap is detrimental to long serving workers and not the fat cats to which it was designed to affect.

Eversheds global law firm partner Giles Orton said: “This is a very welcome announcement. The PPF cap has, as the minister now acknowledges, proved to be very unfair. NPA operates as a cliff edge. One member can receive unlimited compensation. Another member a few days younger can see his pension massively cut back, potentially to less than the 50 per cent.”

Share Story: