The Pension Protection Fund has uplifted payments to a group of pensioners affected by a European court ruling.
In an update on its website this week (September 2), the pensions lifeboat stated it has increased payments to a second batch of PPF and Financial Assistance Scheme pensioners – those whose benefits were reduced to below 50 per cent of their pension value when they entered the fund of last resort.
The first group – those who had a long service cap in place – started receiving uplifted payments in April.
The move follows the Hampshire case ruling from the Court of Justice of the European Union (CJEU), handed down in September 2018, which determined that PPF members should not receive less than 50 per cent of their entitled benefits in the event of the insolvency of their employer.
UK law establishes that the pensions lifeboat will pay 90 per cent of a scheme member's benefits if they have not reached the normal retirement age of the scheme when they are transferred into the pensions lifeboat.
But there is a cap on the total amount to be paid each year, currently £40,000 at age 65, which means that previously to the judgement, high-earners could effectively end with a pension worth less than 90 per cent of their benefits.
Individuals who accrued benefits before April 1997 could also see large cuts because members receiving compensation from the PPF are not entitled to inflationary increases before that date.
However, the PPF will not pay arrears at this moment on the latest increases because there are ongoing court proceedings about the way these are being calculated and it does not want to risk making overpayments.
FTAdviser reported in April that the PPF has set aside £300m to increase compensation to members affected by the Hampshire case.
The lifeboat will continue to assess the remaining members who may be affected by the ruling.
This includes pensioners for whom the effect of the cap alone did not take them below the 50 per cent minimum, but when this was combined with other factors, they did fall below the threshold.
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