If you are already receiving compensation from the Pension Protection Fund and want information on your entitlements, this and relevant FAQs can be found on our members' site.
Broadly speaking the Pension Protection Fund will provide two levels of compensation which are outlined below.
1. For individuals that have reached their scheme’s normal pension age or, irrespective of age, are either already in receipt of survivors’ pension or a pension on the grounds of ill health, the Pension Protection Fund will generally pay 100% level of compensation.
In broad terms and in normal circumstances, this means a starting level of compensation that equates to 100% of the pension in payment immediately before the assessment date (subject to a review of the rules of the scheme by the Pension Protection Fund).
The part of this compensation that is derived from pensionable service on or after 6 April 1997 will be increased each year in line with inflation capped at 2.5%. This could, potentially, result in a lower rate of increase than the scheme would have provided.
2. For the majority of people below their scheme’s normal pension age the Pension Protection Fund will generally pay 90% level of compensation.
In broad terms and in normal circumstances, this means 90% of the pension an individual had accrued (including revaluation) immediately before the assessment date (subject to a review of the rules of the scheme by the Pension Protection Fund) and revaluation in line with the increase in the inflation between the assessment date and the commencement of compensation payments, this revaluation being subject to a cap of 5% compound per annum in respect of compensation attributable to pensionable service prior to 6 April 2009, and a cap of 2.5% compound per annum in respect of compensation attributable to pensionable service on or after 6 April 2009.
This compensation is subject to an overall annual cap, which, as at April 2011, equates to £29,897.42 at age 65 after the 90% has been applied. (the cap will be adjusted according to the age at which compensation comes into payment. Please refer to the current compensation cap factors for caps applicable at other ages).
Once compensation is in payment, the part that derives from pensionable service on or after 6 April 1997 will be increased each year in line with inflation, capped at 2.5%. Again, this could result in a lower rate of increase than the scheme would have provided.
In addition there will also be compensation for certain survivors.
IMPORTANT
The way in which PPF compensation is calculated changed in 2011. This is because the Government has chosen to use the Consumer Prices Index (CPI) with which to calculate annual increases, rather than the Retail Prices Index (RPI). This change is fully explained in the letters below. Please choose the one most appropriate to your situation:
PPF - Retired Member
PPF - Deferred Member
COMPENSATION AND DIVORCE - FACTSHEET
Regulations which set out how Pension Protection Fund (PPF) compensation may be affected for members who get divorced/have their civil partnership dissolved came into force on 6 April 2011.
These new rules make provision for a member’s pension compensation to be shared with their ex-spouse or former civil partner if the court makes
a pension compensation sharing order.
For more information, please view the factsheet by clicking on the link above. You can also view the PPF Divorce Charges.
The Pension Protection Fund has the ability to alter the levy to meet its liabilities. However, in extreme circumstances compensation could be reduced.
- Revaluation and indexation could be reduced by the Pension Protection Fund if circumstances required it.
- Levels of compensation could be reduced by the Secretary of State on the recommendation of the Pension Protection Fund.