Pension Protection Fund (Compensation Cap)

Work and Pensions written statement – made on 25th June 2013.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

On 4 December 2012, during the Adjournment debate on the position of the Visteon pensioners, I announced that I would be conducting a review of how the Pension Protection Fund compensation cap operated, particularly in relation to those who have been members of a pension scheme for a long time.

The Government accept that the PPF compensation cap could have a disproportionate effect on some people who were members of a scheme for a long time. As a result, I propose that the compensation cap will be increased by 3% for every full year of service above 20 years. There will still be a maximum, which will be double the standard cap.

It is my intention to bring forward legislation to revise the compensation cap as soon as parliamentary time allows.

This revised compensation cap will not be backdated: anyone covered by this change who is already in receipt of capped compensation will get any increase from the date the relevant legislation is in place. The revised cap will also affect any scheme that does not enter the PPF, but only where it begins to wind up or enters the PPF assessment period after the revised cap is introduced.

For example, a person who has been a member of a pension scheme for 40 years and had accrued a pension of £50,000 would, if they took their compensation on reaching age 65 today, be paid a capped amount of £31,380. Following my proposed change, this person would see their compensation increase to £45,000.

Annotations

George Morley
Posted on 26 Jun 2013 11:40 pm (Report this annotation)

Question : As a 'frozen pensioner' I wonder where my state pension protection is. Now why did't we have that ?
Answer : Oh but we have in reality, it's a surplus that would cover that but it is being misused by the government who who prefer to borrow from our ring fenced NI fund rather than pay all qualified claimants their rightful pension before doing so.
Question: But that's not fair surely ?
Answer : Well it is and it is'nt ! You see it is'nt if you are an MP in opposition but if you are in government it is.
That's politics.

Jane Davies
Posted on 27 Jun 2013 4:06 am (Report this annotation)

So Mr Webb I have accrued a pension of £50,000 but you freeze it just because of where I live, what is that? Is it theft? Because I have paid for that accrued amount over 40 years and you are withholding my cost of living increases. Yes Mr Webb I can answer for you...that IS theft.