In 2018, the Court of Justice of the European Union (ECJ or CJEU) ruled that individual members of pension schemes should receive at least 50 per cent of the value of their accrued pension benefits in the event of employer insolvency.

In May 2020 the Administrative Court heard a challenge brought against us by a number of members to the way we’re implementing the ruling, and to the lawfulness of the PPF compensation cap. 

On 22 June the court ruled that our approach of making a one-off calculation is permissible. However over the course of their lifetime each individual, and separately each survivor must receive at least 50% on a cumulative basis of the actual value of the benefits that their scheme would have provided. 

The ruling found that the PPF compensation cap is unlawful on grounds of age discrimination. 

We’re studying the detail of the judgment carefully to decide our next steps, and will work closely with the Department for Work and Pensions (DWP) to understand how the UK government will respond. 

While we do so, we’ll continue to pay our members their current level of benefits.

The government sets the level of compensation we pay, balancing the needs of members and the needs of our levy payers, so it’s for them to decide how to respond to the part of the judgment relating to the cap.

Click on the relevant questions below to find out more about the ruling and what it means for you.

General

How are you calculating the increase?

Who has started to receive increased compensation so far?

Are there other members who might still be due an increase?

What are these other factors?

I’ve heard there is another case at the CJEU, PSV v Gunther Bauer. Will this affect the amount of compensation you pay?

 

I think I’m in this new phase

Are you prioritising certain groups of members within this remaining phase?

When will I hear from you?

What will you ask me to send to you?

Why are you asking me to send you information, rather than my former scheme?

How long will it take you to assess whether I’m entitled to an increase?

If you assess that I’m due an increase, when do you expect to start paying it?

Will my increased payments include arrears?

Will there be any time limit on arrears?

I’ve already sent you information about my former scheme benefits, when you were assessing capped members. Will I have to send you this again?

I’m not affected by the cap and you’ve not written to me about this issue before, although I think I’m due an increase in this phase. Will you write to me asking me for additional information?

If I’m due an increase, can I take some of it as a tax-free lump sum?

I’m due to retire soon. Can I have a new illustration, to show what I would receive following any increase I might be due?

I’m deferred and won’t be retiring for some time. Will I be affected by the Hampshire ruling, and if so will I be informed of any change in my benefits?

If I die before my increase is paid, will the arrears be paid to my estate?

Will the court case challenging the way you are calculating the increases affect my payments?

I’m a surviving spouse. Will my benefit change as a result of the judgment?

I’m a capped PPF member.  Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Is there a risk the arrears I can claim will be reduced as time goes on while you decide your next steps?

I’m in one of the earlier phases

You’ve started paying me my increased compensation, but I’ve not yet received arrears. Will I get them now the court case is over?

When arrears are paid, will they be taxed?

Will there be any time limit on arrears?

You wrote to me and told me I’m eligible for an increase, but I’ve not received it. When will I be paid?

You wrote to me and told me that I’m not due an increase. Will my case be reconsidered in this new phase?

I should have been considered in an earlier phase, but I didn’t hear from you. What can I do?

Will the court case challenging the way you are calculating the increases affect my payments?

I’m a surviving spouse. Will my benefit change as a result of the judgment?

I’m a capped PPF member.  Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Is there a risk the arrears I can claim will be reduced as time goes on while you decide your next steps?

General

How are you calculating the increase?

We’re running a one-off valuation exercise to determine if the total actuarial value of your original scheme benefits is more than 50 per cent of your compensation. If it is, you’ll then receive an increase.

Who has started to receive increased compensation so far?

We’ve started increased payments to all pensioners affected by the PPF compensation cap – either the standard assistance cap, or the long service cap – who’ve sent us the information we asked for. There are some capped pensioners who we’ve assessed as due an increase, but we need them to send us information before we can pay it.

We’ve also started increasing payments for pensioners for whom the effect of the cap alone didn’t take them below the 50% minimum but, when combined with other factors, do fall below the threshold.

Are there other members who might still be due an increase?

Yes. We’re gathering data for those members who weren’t subject to the cap but whose benefits were significantly affected because of these other factors.

What are these other factors?

The other factors include:

  • If the annual increases a member would have received under their former scheme would have been significantly more than the annual increases which apply under the PPF
  • Differences between their former scheme’s benefit structure and the PPF’s benefit structure, eg spouse’s benefits

I’ve heard there is another case at the CJEU, PSV v Gunther Bauer. Will this affect the amount of compensation you pay?

The December 2019 ECJ judgment in the case of PSV v Gunther Bauer has restated that, as a minimum, every individual must receive at least 50% of their accrued benefits. 

We consider that the implementation methodology we announced following the ECJ’s judgment in Hampshire, which will make sure that all our members receive at least 50% of the value of their accrued benefits, meets this requirement. 

There are other details of the judgment that we’re working through with the Department for Work and Pensions.  In the meantime, we’ll continue to make payments in line with the existing levels, and to assess and increase payment to those members affected by the Hampshire ruling.

I think I’m in this new phase…

Are you prioritising certain groups of members within this remaining phase?

We’ve started with pensioners for whom the effect of the cap alone didn’t take them below the 50% minimum, but when this is combined with other factors, do fall below the threshold.

We’re also gathering the information we need for the remainder of members, who have not been capped but are affected only because of other factors. 

When will I hear from you?

If you’ve already sent us your latest benefit statement from your former scheme, you’ll hear from us when we confirm whether you are entitled to an increase.

If we think you’re affected, we’ve written to you to ask you to send us additional information. If you haven’t sent us the information we asked for yet, please do so, or let us know if you need us to remind you what we asked you for. You can also find a copy of the letters we send you by logging on to your account on our members’ website.

If we think you’re in the group of members who are affected only because of other factors, we may not write to you at all until we have completed your calculations. This is because we expect we will have collected sufficient data to be able to make these calculations. 

What will you ask me to send to you?

We’ll ask you to send us your last benefit statement from your former scheme and your scheme booklet, if you have it.  

We’ll also ask you to let us know if you have any fixed transfers-in. 

Why are you asking me to send you information, rather than my former scheme?

Although we hold the information we need to calculate our members’ benefits under existing legislation, we need further information to be able to calculate the 50 per cent minimum in individual cases.

This means we have to gather what we need from various sources, including contacting members to see if they have information which could potentially help us.

For members whose schemes wound-up or transferred to us some time ago, it’s likely that the members themselves may be able to give us the information we need faster; in particular where scheme documents have been archived.

We’re grateful to members who have helped us with this task so far. 

How long will it take you to assess whether I’m entitled to an increase?

We hope to have assessed and started to increase payments to the majority of capped members in this category by September 2020, and 90 per cent of everyone entitled to an increase by the end of March 2021.
 

If you assess that I’m due an increase, when do you expect to start paying it?

 

We hope to increase payments to the majority of capped members in this category by September 2020, and 90 per cent of everyone entitled to an increase by the end of March 2021. 

Will my increased payments include arrears?

Although we’ve been processing increases, we haven’t yet paid any arrears, including tax free lump sums, unless it’s a year since we sent you your new calculation, and you retired and/or your scheme transferred to us after 5 September 2012. We’ve not paid arrears in case the court decided the way we’re calculating them was wrong.

We’re studying the detail of the June 2020 judgment carefully with DWP to decide our next steps. Until then, we’ll continue to pay you at your current rate.

The terms of the judgment could result in us having overpaid your increase, and as we’ve always made clear, if this is the case we might have to recover the overpayment from your arrears. We’ll make a further announcement as soon as we can. 

Will there be any time limit on arrears?

The judgment ruled that a six year limitation period may be applied to arrears of increased compensation payments due as a result of removing the PPF compensation cap.

It didn’t rule on the applicable limitation period for arrears of increased compensation payments due to the Hampshire ruling. We’ll make an announcement on further details after discussion with DWP and our Board. 

I’ve already sent you information about my former scheme benefits, when you were assessing capped members. Will I have to send you this again?

No, you won’t need to resend this information.

I’m not affected by the cap and you’ve not written to me about this issue before, although I think I’m due an increase in this phase. Will you write to me asking me for additional information?

 

If you’re in the group of members who are affected only because of other factors, we may not write to you at all until we have completed your calculations. This is because we expect we’ll have collected sufficient data to be able to make these calculations. 

If I’m due an increase, can I take some of it as a tax-free lump sum?

This depends on when or if you retired:

1. If you retired before your employer became insolvent, you’ll have had the opportunity to take up to 25 per cent of your full scheme pension as tax free cash.        This means that there is no additional cash available for you to take as a tax-free lump sum.

2. If you retired after your employer became insolvent, but before your benefits have been increased in accordance with the ECJ ruling, our approach will depend on whether your compensation was capped:

  • If your compensation was capped, you’ll be given the option to take a tax-free lump sum based on the increase.  We’ll delay payment of the lump sum to avoid the risk of us having to reclaim any overpayments that may be needed once the court case ends. However, if we decide to apply a time limit under the Limitation Act, members affected by limitation will not be able to take a tax-free lump sum.  Our ability to apply a time limit is one of the matters being considered in the court case.
  • If your compensation was uncapped, you won’t have the option to take a tax-free lump sum based on the increase.  This is because we expect that the increase for most uncapped members is likely to be small, and so it would be administratively disproportionate to offer uncapped members this option.

3. If you have not yet retired, we’ll send you details of your options when you decide you want to retire. 

I’m due to retire soon. Can I have a new illustration, to show what I would receive following any increase I might be due?

Any retirement illustrations we give you will be based on your benefits before the CJEU increase has been applied.

We’re looking on a case-by-case basis at members who are approaching retirement and are likely to be affected, to see if any adjustment is necessary.

This may mean that we ask you for additional information.

I’m deferred and won’t be retiring for some time. Will I be affected by the Hampshire ruling, and if so will I be informed of any change in my benefits?

If we think you’re affected by the ruling, we’ll write to you nearer to your retirement if we need more information to carry out our checks. You don’t need to contact us.    

Because the Hampshire ruling is about how much we must pay you when you retire, we can’t accurately calculate this a long way before you retire as we won’t know how much your PPF benefit might increase, nor what level the PPF compensation cap will be. So if you ask us for a retirement illustration before we contact you, the illustration we give you will be based on your benefits before the CJEU increase has been applied.

Once you’re closer to retiring, we’ll be able to make sure you’ll be receiving at least 50% of the value of your former scheme benefit on retirement. 

If I die before my increase is paid, will the arrears be paid to my estate?

Yes, any member who would have been eligible for an increase to their compensation but has passed away, will still be eligible to receive the arrears due up to the date of death.

In addition, any survivors receiving compensation following the member’s death will receive an increase to their payments.

As we’re currently involved with court proceedings, which are examining the way we’re calculating increases, we’re not yet able to pay arrears.

We believe it would be wrong to risk having to recover overpayments should the court decide that we must take a different approach.

As soon as we can, we’ll write to confirm the amount of arrears due. Interest will continue to accrue on any arrears that may become payable. 

Will the court case challenging the way you are calculating the increases affect my payments?

We’re studying the detail of the judgment carefully with DWP to decide our next steps. We’ll make a further announcement as soon as we can. Until then, we’ll continue to pay you at your current rate.

I’m a surviving spouse. Will my benefit change as a result of the judgment?

We’re studying the detail of the judgment carefully with DWP to decide our next steps. Until then we’ll continue to pay you at your current rate. We’ll make a further announcement as soon as we can.

I’m a capped PPF member.  Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Is there a risk the arrears I can claim will be reduced as time goes on while you decide your next steps?

You don’t need to contact us. We’re studying the detail of the judgment carefully with DWP to decide our next steps. 

Until we’ve decided our next steps, we’ll continue to pay you at your current rate. 

The time period in relation to any claims for arrears of PPF compensation because of the application of the PPF compensation cap – provided for in paragraphs 26 and 26A of Schedule 7 to the Pensions Act 2004 – may be affected by time limits under the Limitation Act 1980. Although the Board will not without further notice treat time as continuing to run from 22 June 2020 – being the date of the recent Administrative Court’s judgment – so no PPF members will be prejudiced by not making a legal claim for arrears now.

We’ll make a further announcement as soon as we can.
 

I’m in one of the earlier phases…

You’ve started paying me my increased compensation, but I’ve not yet received arrears. Will I get them now the court case is over?

We’re studying the detail of the judgment carefully with DWP to decide our next steps. Until then, we’ll continue to pay you at your current rate. 

The terms of the judgment could result in us having overpaid your increase, and as we’ve always made clear, if this is the case we might have to recover the overpayment from your arrears. We’ll make a further announcement as soon as we can. 

We’ll make a further announcement as soon as we can.

When arrears are paid, will they be taxed?

When we pay your arrears we’ll write to let you know how they’ll be taxed. 

Will there be any time limit on arrears?

The judgment ruled that a six year limitation period may be applied to arrears of increased compensation payments, due as a result of removing the PPF compensation cap. 

It didn’t rule on the applicable limitation period for arrears of increased compensation payments due to the Hampshire ruling. 

You wrote to me and told me I’m eligible for an increase, but I’ve not received it. When will I be paid?

If you’ve sent us the information we asked for but haven’t been paid your increase, please contact us.

If you’ve not yet replied to our request for information, we can’t calculate your increased payment. When we receive your response, we’ll calculate your increase and pay it from the next payment date. 

You wrote to me and told me that I’m not due an increase. Will my case be reconsidered in this new phase?

Yes. We’re now looking at pensioners for whom the effect of the cap alone didn’t take them below the 50% minimum, but when this is combined with other factors, do fall below the threshold.

I should have been considered in an earlier phase, but I didn’t hear from you. What can I do?

We believe we’ve contacted all capped pensioners. If you’re capped, but haven’t heard from us, please check your account on our members’ website. If you haven’t heard from us, please get in touch. 

Will the court case challenging the way you are calculating the increases affect my payments?

We’re studying the detail of the judgment carefully with DWP to decide our next steps. We’ll make a further announcement as soon as we can. Until then, we’ll continue to pay you at your current rate.

I’m a surviving spouse. Will my benefit change as a result of the judgment?

We’re studying the detail of the judgment carefully with DWP to decide our next steps. Until then we’ll continue to pay you at your current rate. We’ll make a further announcement as soon as we can.

I’m a capped PPF member.  Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Is there a risk the arrears I can claim will be reduced as time goes on while you decide your next steps? 

You don’t need to contact us. We’re studying the detail of the judgment carefully with DWP to decide our next steps. 

Until we’ve decided our next steps, we’ll continue to pay you at your current rate. 

The time period in relation to any claims for arrears of PPF compensation because of the application of the PPF compensation cap – provided for in paragraphs 26 and 26A of Schedule 7 to the Pensions Act 2004 – may be affected by time limits under the Limitation Act 1980. Although the Board will not without further notice treat time as continuing to run from 22 June 2020 – being the date of the recent Administrative Court’s judgment – so no PPF members will be prejudiced by not making a legal claim for arrears now.

We’ll make a further announcement as soon as we can.

The latest updates on the CJEU ruling

The court case and our plans to pay increases to members that are affected by the CJEU ruling are ongoing.

You'll find regular updates about the progress we are making in our latest news section.