PPF wins compensation calculation appeal; DWP appeal dismissed

The Pension Protection Fund (PPF) has won its appeal to continue to utilise the 'Hampshire Uplift' following the Court of Appeal ruling on the Secretary of State for Work and Pensions and the Board of the PPF vs Paul Hughes and others case.

The Court of Appeal today (19 July) confirmed that it had granted the PPF permission to appeal against the High Court’s previous judgment in the Hughes and others v The Board of the PPF case, which ruled that the PPF compensation cap was unlawful.

In particular, the PPF objected the High Court judge’s conclusion on its approach survivors’ benefits and the Hampshire Uplift, which was introduced following the 2018 Hampshire judgment.

The so-called Hampshire Uplift required PPF make a one-off compensation calculation to ensure the individual would receive at least 50 per cent of the benefits their scheme would have provided.

This was in comparison to the 'lifetime payment test', which considered whether those who live for longer than expected may receive less than 50 per cent of benefits, in turn requiring PPF to continuously calculate whether compensation has fallen below this level.

In addition to this, the Court of Appeal has ruled that the High Court judge "erred" when deciding that PPF’s approach to survivors’ rights is “wrong in principle”, allowing PPF’s appeal on this basis.

In contrast, the Secretary of State for Work and Pensions, Thérèse Coffey, has been denied permission to appeal on the grounds of delay and scope/implementation.

She had argued that the original claim was delayed and should have been disregarded, and that the EU judgment and legislation on the compensation cap should not apply as it was subject to UK law.

Furthermore, whilst the Court of Appeal allowed the Secretary of State’s appeal on grounds of age discrimination, it agreed with the original High Court judgment and, as such, dismissed the appeal.

However, the ruling has not addressed queries as to the period of time over which the cap needs to be disapplied, or as to the underlying assumptions used in PPF and Financial Assistance Scheme calculations, leaving uncertainties as to the full impact of the ruling.

Indeed, the ruling clarified that whilst it is lawful for the PPF to perform a "single, ex ante calculation", the calculation in principle is immune from challenge, with the court expressing no view as to how finely tuned the assumptions used in the calculation must be to reality or how broad or narrow the margin of judgement may be.

In a statement on the ruling, the PPF commented: "The Court of Appeal has supported our approach for increasing payments to PPF and FAS members following the 2018 European Court of Justice judgment in the Hampshire case.

"It has also confirmed the High Court’s decision that the PPF compensation cap, as set in legislation, is unlawful based on age discrimination and has to be disapplied.

"However the period of time over which the cap has to be disapplied is not yet clear, and as such, the Secretary of State for Work and Pensions has asked for more time to address the court on this complex legal issue.

"We also don’t yet know whether the respondents or the Secretary of State will want to appeal.

"So for now we’ll continue to pay members their current level of benefits. We’ll provide more information on the implementation of the judgment as soon as we’re able."

A DWP spokesperson stated: “We are pleased that the Court of Appeal upheld the PPF’s appeal and found that its methodology for implementing the Hampshire Judgment was lawful.

“The government is considering its next steps in the Court of Appeal judgment regarding the compensation cap.”

    Share Story:

Recent Stories

A time for fixed income
Francesca Fabrizi discusses fixed income trends and opportunities with Goldman Sachs Asset Management Head of UK Pensions Solutions, Fixed Income Portfolio Management, Henry Hughes, in our Pensions Age video interview

Purposeful run-on
Laura Blows discusses purposeful run-on for DB schemes with Isio director, actuarial and consulting, Matt Brown, in Pensions Age’s latest video interview
Find out more about Purposeful Run On

Keeping on track
In the latest Pensions Age podcast, Sophie Smith talks to Pensions Dashboards Programme (PDP) principal, Chris Curry, about the latest pensions dashboards developments, and the work still needed to stay on track
Building investments in a DC world
In the latest Pensions Age podcast, Sophie Smith talks to USS Investment Management’s head of investment product management, Naomi Clark, about the USS’ DC investments and its journey into private markets