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We published the government response to this consultation on 11 September 2018.
The government has introduced regulations to clarify that a relevant fixed pension is to be treated as attributable pensionable service for the purpose of calculating Pension Protection Fund (PPF) compensation (except for the purposes of applying a single compensation cap). This will ensure that the PPF has the legal basis to:
- pay survivor benefits
- index and revalue payments
The PPF provides compensation to members of defined benefit pension schemes where the sponsoring employer is insolvent. An important principle of the PPF is that compensation should be based on the member’s total pension benefits within a scheme, and that this should be subject to an overall compensation cap where appropriate.
A recent High Court judgment (Mr Beaton v the Board of the PPF) has resulted in the legislation being interpreted in a way that does not reflect PPF practice or the policy intent in cases where a person has benefits derived from a fixed pension.
This consultation concerns changes to PPF compensation rules to remedy the immediate problems caused by the judgment and ensure that the PPF has the legal basis to administer the compensation regime as intended.
The proposed regulations seek to clarify that a relevant fixed pension is regarded as attributable pensionable service for the purpose of calculating PPF compensation, including the application of the PPF compensation cap where relevant.