On the go: Court proceedings have started against the Pension Protection Fund, seeking to challenge its approach for calculating any increases due to its members as a result of a European Court of Justice ruling last September.
The ECJ held that pension scheme members should receive at least 50 per cent of the value of their accrued old age benefits if their employer becomes insolvent.
In November 2018, the lifeboat set out its plans for calculating and paying increases to members affected by the ECJ ruling, but in an update published last week, the PPF stated that the new court case could alter these plans: “We’ve thought carefully about whether we should stop all work to implement the ruling in light of the new court proceedings. For the time being, we’ve concluded that it’s right to continue with our plans to pay increases to affected members.
“However, we currently intend to limit the size of arrears payments. This is to avoid the risk of having to recover overpayments from members should the court decide we must take a different approach to calculating the increase.
“We expect our proposed approach to lead to higher payments in the near term than some of the alternatives the court is being asked to consider. Interest will continue to accrue on the arrears.
“At this time we can’t say when the court case may start or end, although the court may be asked to deal with the case quickly. We will keep our approach to implementation under review in the light of how the proceedings develop”.
The PPF said it will continue to work through the technical aspects of its approach to calculating increases, but it has revealed how it plans to approach implementing the judgment:
“We’ve decided how we’ll deal with survivor benefits. We intend to include them in the valuation of a member’s scheme benefits so that the survivor, where there is one, will receive 50 per cent of the member’s, adjusted, PPF compensation in the normal way.
“We’re also continuing with our plans to make payments to members who are likely to be affected most. We hope to be able to make payments in the next couple of months to the initial group of affected members whose compensation has been adjusted for the long service cap.”
The PPF is in the process of writing to all long-service-cap members to let them know whether or not they are being considered for an increase at this stage.
It will then start to look at members who have had their compensation capped and will write to those members that they think are most likely to be affected. The PPF says it hopes to be in a position to make those payments during summer 2019.
It is also working to identify those members who are coming up to retirement and might be affected by the ruling.
