The Pension Protection Fund’s plan to top up compensation where members receive less than half of their original pension unfairly misses out some members of the Financial Assistance Scheme, according to a pensions campaign group.
The Pensions Action Group, which primarily campaigns for the fair treatment of members in the FAS, questioned the extent to which the exclusion of ‘solvent’ schemes from the update complies with a recent EU court judgment.
The Court of Justice of the European Union ruled in September that the UK pensions lifeboat must ensure that all members are paid at least 50 per cent of what their employer promised them. Benefits can fall below this threshold due to the cap on PPF annual payouts, and because the PPF does not provide inflation protection for benefits accrued before 1997.
Why can’t they just accept the judgment for what it is and get on with it?
Terry Monk, Pensions Action Group
The PPF said on Monday it would begin topping up member benefits “as quickly as possible”, by comparing the lifetime value of a member’s original entitlement, including original inflation-proofing and survivor benefits, with what they would get under the lifeboat.
It will then increase the level of benefits paid to the member with standard PPF indexation rules so that, over their lifetime, they receive at least 50 per cent of what was promised to them by their employer.
The fund said this top-up should be a one-off alteration, and has begun to contact members confirming data accuracy. It will proceed with the change ahead of the Department for Work and Pensions translating the CJEU judgment into UK law.
Action group complains of unfairness
While the benefits paid to some FAS members will also be adjusted, it will not apply to members of so-called solvent schemes.
The FAS was set up to provide for members who did not receive all of their promised pensions before the creation of the PPF in 2004. It includes schemes whose employers were unable to afford their promises in full, so wound up their scheme at reduced levels via a compromise agreement before continuing in solvency.
Terry Monk, a member of the PAG and a former member of Bradstock Group’s defined benefit scheme who will not see his benefits increased, expressed frustration at the decision not to qualify solvent schemes for the top-up.
“I was so angry and upset when I heard this,” he said. “[Solvent schemes] were accepted as a qualifying scheme by FAS… now it suits them to not qualify them.”
Government considering remedies
He said the cost of resolving the issue would be minimal, and raised the prospect of future legal challenge to the structure.
“What they announced… on the surface doesn’t look in my view as if it’s complying with the court,” he said. “Why can’t they just accept the judgment for what it is and get on with it?”
A DWP spokesperson said the government was considering the prospect of extending the change to all FAS members, but is not legally obliged to do so.
“As the judgment... does not cover solvent employers, the PPF does not have the legal basis to pay an increase to FAS members where their employer is solvent,” the spokesperson said. “The government wants to ensure parity of treatment for FAS members where possible and is currently exploring what changes are required to existing legislation to achieve this.”
