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ECJ rules cap on PPF payments “unlawful”

In a landmark ruling the European Curt of Justice rules that protection of UK workers’ pensions is unlawful.

by Emma Simon
September 6, 2018
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The ECJ has demanded that the Pension Protection Fund changes its cap on payments, to ensure that workers cannot lose more than 50 per cent of their promised pension.

Pension campaigner Ros Altmann says that this change will only effect a small number of people currently taking benefits from the PPF. However she says for those affected this will be “hugely important”.

She says: “Until now the PPF only offered compensation up to a capped amount. This meant long-serving senior workers, with pensions paying over £39,000, had their payments cut back to the cap if their employer’s scheme failed.”

The case was brought after a number of workers took their case to the European Courts. In some cases workers lost up to 67 per cent of their pension.

As this only affects a small number of claimants it is not thought that it will have put a significant financial strain on the PPF. The ECJ estimates that this ruling will increase PPF liabilities by around 1 per cent, so should not impact firms paying the PPF levy.

This ruling will also benefits members of the Financial Assistance Scheme, funded by the DWP. This scheme covers those whose pension schemes failed prior to 2004 – when the PPF was set up.

Altmann says the UK courts will now rule on how compensation should be calculated in future and how any arrears and retrospective payments should be dealt with.

The PPF will now have to adjust its compensation calculations so that the cap does not operate as a fixed monetary amount but is set to ensure the percentage of pension replaced is at least 50 per cent. It is not clear what will happen to schemes which have already secured annuities for members above the current PPF benefit levels.

 

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