Improved PPF Compensation Cap in the making?

Kevin Burge

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The Department for Work & Pensions have said that they will review the compensation cap to ensure that long serving workers are not unfairly penalised.

The cap is one of the fundamental elements of the PPF’s compensation structure and any change will affect the long term strategy of the PPF to be self funded by 2030. It will of course be of immediate interest to all levy payers as if any increase was agreed then the levy will increase, all else being equal.

It must be stressed that this is very early days and is one of the many initiatives that is coming directly from having a pensions minister who wants to fundamentally change the pension horizon and is listening to all parties.

One of the ideas mooted is that there will be a “floor”cap which is then increased according to length of service in the scheme.

As would be expected this announcement has gone down well in certain quarters especially in the Early Retirees Pension Action Group who have long said that the cap was totally unfair.

It must be said that the cap does only affect a small proportion of members and only affects those who have not reached the scheme’s normal pension age.  An increase to benefits for those with larger pensions would also seem to go against other recent moves to penalise larger benefits (e.g. lowering of the lifetime and annual allowances).  For example, for the cap to apply, a member with 25 years service would have to have a salary of at around £75,000 or more.  However any loss of a hard earned benefit is always a bitter pill to swallow.

Kevin Burge

Post by Kevin Burge

An experienced pension consultant with specific expertise in Scheme terminations - PPF, FAS transfer and winding up.