New Schedule 1 - Pension Protection Fund: increased compensation cap for people with long service - Part 1 - The new compensation cap

Pensions Bill – in a Public Bill Committee at 5:00 pm on 11th July 2013.

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1 Schedule 7 to the Pensions Act 2004 (pension compensation provisions) is amended as follows.

2 In paragraph 26 (the compensation cap), for the definition of “the compensation cap” in sub-paragraph (7) substitute—

““the compensation cap” has the meaning given by paragraph 26A;”.

3 After paragraph 26 insert—

26A (1) This paragraph gives the meaning of “the compensation cap” for the purposes of paragraph 26.

(2) The amount of the compensation cap for a person depends on the person’s age and length of pensionable service at the time when the person first becomes entitled to the relevant compensation.

(3) “The compensation cap” for a person who has 20 or fewer years of pensionable service at that time is the standard amount.

(4) “The compensation cap” for a person who has more than 20 years of pensionable service at that time is—

(a) the standard amount, plus

(b) for each additional year, an amount found by multiplying the standard amount by 3%.

(5) A person has an “additional year” for each whole year of pensionable service that exceeds 20 years of pensionable service.

(6) If the total amount calculated under sub-paragraph (4)(b) would exceed the standard amount, it is to be treated as being equal to the standard amount.

(7) In sub-paragraphs (3) and (4) “the standard amount”—

(a) for a person who is 65 years old at the relevant time, means  the amount specified by the Secretary of State by order, and

(b) for a person of any other age at the relevant time, means the amount specified under paragraph (a) as adjusted in accordance with actuarial adjustment factors published by the Board.

(8) In any case where the Board is satisfied that, under the admissible rules, a person is entitled to benefits that are not attributable to a particular period of pensionable service, the  Board may for the purposes of this paragraph treat the person as having a length of pensionable service to reflect those benefits (which is in addition to any other pensionable service that the person has).

(9) In any case where the Board is satisfied that it is not possible to identify the length of some or all of a person’s pensionable service under the admissible rules, the Board may, having regard to those rules, determine its length for the purposes of this paragraph.

(10) Other expressions used in this paragraph have the same meaning as in paragraph 26.”