The Department for Work and Pensions has delayed regulations planned for this week to allow pensioners to get fairer payments from the Pension Protection Fund.
According to the DWP, legislation to introduce a long service cap was passed in the Pensions Act 2014, providing a 3 per cent increase on the existing compensation cap for each full year of pensionable service above 20 years.
Additionally, the government is looking to lay the necessary secondary legislation as soon as possible, which will bring the cap into effect.
Any increase in compensation will be paid from the date the legislation comes into force and members who are already receiving compensation will get the increase applied to the original compensation cap which applied to them.
According to the DWP, only a small number of people are affected by the PPF cap, and the vast majority receive compensation based on 90 per cent of what they had accrued in their pension scheme.
“The PPF long service cap will give additional support to someone who’s compensation has been capped and was a member of a pension scheme for over 20 years,” read a statement, adding: “We’ve committed to bringing this change in and will be legislating as soon as possible.”
A PPF spokesperson said: “PPF compensation levels are set by government. Once the regulations have been made, members can be assured that we will implement any changes promptly and efficiently.”
Ex-pensions minister Ros Altmann - who stepped down from the role this week following a Cabinet reshuffle by prime minister Theresa May - has said it was “disappointing” the DWP has failed to introduce regulations to allow pensioners to receive higher payments from the PPF.
“A minority of workers in failed firms have lost more than half their pension payments and are waiting for increased compensation that had been delayed for years,” she commented.
“The regulations are ready to be laid this week, so further delays are simply unfair. Having pushed DWP officials to get the required regulations ready to increase the PPF cap, they should be laid immediately.
“All the necessary work has been completed and we planned to announce the regulations this week. It is so disappointing that the DWP has failed to act, causing further unfair delays to those affected.”
Mike Pendergast, an independent financial adviser with Cheshire-based Zen Financial Services, said the PPF cap discriminates against people who have built up larger pension entitlements.
“Whilst covering smaller pots allows the scheme to concentrate on pensioners who are perhaps the most needy, and to whom even a small pension makes a big difference, it seems unfair that people who have worked for an employer for a lengthy period and built up pension entitlements from both their own contributions and those of their employer should be penalised when, through no fault of their own, the employer reneges on their responsibilities.”
In April this year, it was announced that the Work and Pensions select committee had plans to investigate the PPF.
ruth.gillbe@ft.com
