Pension Protection Fund compensation cap 'must be disapplied' – DWP's appeal dismissed

Guy Opperman discusses the ‘priority’ for pension trustees

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In a judgement handed down today, the appeal by the UK Government over the lawfulness of a cap on Pension Protection Fund compensation was dismissed. This means that the cap must be removed for affected members.

On Twitter, a post by the @PPF, Pension Protection Fund, read: “The Court of Appeal has now published the outcome of the Hughes judicial review and supported our approach for increasing payments to PPF & FAS members.

“It’s also confirmed that the PPF compensation cap must be disapplied.”

The post also directed Twitter users to more information on the PPF website.

“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 read.

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Pension sign in pictures

Pension Protection Fund: The UK Court of Appeal dismissed an appeal by the UK Government (Image: GETTY)

“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 DWP 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.”

The PPF is a statutory fund in the UK, which is intended to protect members if their define benefits pension fund becomes insolvent.

So, if an employer goes bust and can’t afford to pay members their promised benefits, the PPF pays compensation to members of eligible scheme.

The compensation cap is used to assess the level of compensation that the PPF pays to individuals.

Retirement Living Standards

Retirement Living Standards were published by the PLSA to help people picture lifestyle costs (Image: EXPRESS)

From April 1 each year, the compensation cap is reviewed to reflect the rise in the general level of earnings in Great Britain since the previous tax year.

Furthermore, the cap varies with the scheme member’s age last birthday.

The PPF explains: “If your pension scheme qualifies, the amount of compensation you get depends on whether you had passed your normal pension age when your employer became insolvent.

“Anyone receiving survivor’s pensions, such as a widows, widowers, children’s, civil partner’s pensions will also normally qualify for 100 percent of the pension income.

“If you were over your normal pension age or started drawing your pension early to due to ill-health, you’re entitled to receive a full pension from the PPF.

“If you were under your normal pension age, you’re entitled to receive a pension of 90 percent the amount you’ve built up when your employer became insolvent. This is also subject to an upper cap set by the government.

“For example, the cap from April 1, 2021 up to and including March 31, 2022 for a 65-year-old is £41,461.07.

“Any compensation paid will be increased in line with legislation and not with the former scheme rules.”

Harry Byrne

Harry Byrne

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