Pension Protection Fund (Compensation Cap)

(Limited Text - Ministerial Extracts only)

Tuesday 25th June 2013 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

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.