In 2018, the European Court of Justice ruled that individual members should receive at least 50 per cent of the value of their accrued old age pension if the employer responsible for funding the scheme they’ve paid into fails.
The vast majority of PPF and Financial Assistance Scheme (FAS) members already receive compensation in excess of 50 per cent of their accrued old age benefits.
This means the number of members affected by this ruling is very small.
Frequently asked questions about the ECJ ruling
Below you'll find information to help you understand the ruling and find out how it will impact you.
Frequently asked questions for PPF members
Get help with the most common questions on the ruling for PPF members
Frequently asked questions for FAS members
Get help with the most common questions on the ruling for FAS members
Frequently asked questions about the Pension Lifetime Allowance
Get help with the most common questions on Lifetime Pension Allowance
The latest updates on the ECJ ruling
It’s been 12 months since the Court of Appeal ruled that the PPF compensation cap was unlawful based on age discrimination. The court did however support our one-off calculation approach for increasing payments to PPF and FAS members.
Since the judgment, we’ve been working hard to implement it, and we wanted to provide you with an update.
Removal of the PPF compensation cap
In May 2022, we wrote to all our capped members to thank them for their patience while we were working to remove the PPF cap. Despite our best efforts, progress to remove the cap and pay any arrears has been slower than we had expected.
In the letter we explained that since the Court of Appeal judgment on 19 July 2021, we’d been gathering and checking essential historical member information so we could proceed with their calculations.
The reason why we don’t already have this information is because we only received the necessary data from scheme trustees to calculate members’ compensation in line with legislation. We also explained that for many members, we’ve had to undertake complex individual calculations because of tax complications.
These calculations are extremely time consuming, but we’re developing an automated system to carry out the complex individual calculations. When this is live, we expect it will help speed up the calculations.
Despite the challenges above, we’ve been making progress and we’ve started making payments to some affected members.
We understand our progress to date will have caused frustration, especially as the arrears for some can amount to significant sums of money. We’re sorry for the worry and inconvenience this has caused, and we thank you for your understanding and patience. We’ll be writing to all our capped members at the end of August with a further update on our progress.
Exceeding LTA allowance
The removal of the PPF cap will cause a number of members who retired after their employer’s insolvency date to exceed their lifetime allowance (LTA) on their retirement date. They will be liable to pay an LTA charge.
Some members have queried whether they can retrospectively apply for LTA protection, to remove or reduce the LTA charge. HMRC has indicated they can if they’re eligible for that protection and have done nothing to invalidate it.
We’re also aware that some members are looking to change the type of protection they have, for example to seek fixed protection 2014 or 2016. If the removal of the cap will cause you to exceed the LTA, we’ll provide you with some draft wording to explain the impact of the court rulings, which you can provide to HMRC.
If HMRC grant you LTA protection, they’ll provide you with a certificate which we’ll need when we remove your cap.
If HMRC rejects your application for LTA protection, we’ve agreed we’ll reimburse members for part or all of the Lifetime Allowance tax charges in some situations.
We’ll write to you with more detail about your options.
Hampshire increases
Since the Court of Appeal’s judgment on 19 July 2021, we’ve developed a model to calculate if any increases are due. Members will receive a Hampshire increase if the value of their PPF compensation or FAS assistance is less than 50 per cent of the value of their former scheme benefit.
We’re currently working through our 440,000 PPF and FAS members and we’ll be in touch if you’re due an increase. If you’re a deferred PPF or FAS member and you retire before we’ve finished our calculation and are due a Hampshire increase, we’ll pay you your arrears as soon as we’re done.
We hope to be able to pay the increases due in the majority of cases by end of December 2022.