In 2018, the Court of Justice of the European Union (ECJ or CJEU) ruled in the Hampshire case 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 ECJ’s Hampshire ruling, and to the lawfulness of the PPF compensation cap. 

On 22 June 2020 the court ruled that over the course of their lifetime each member, 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. This would have required some changes to our approach of making a one-off calculation.

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

We lodged an appeal on 20 August 2020 against the ruling on:

  • the approach we may adopt to meet the Hampshire requirement for members to receive 50% of the value of their entitlement 
  • how survivors’ benefits should be dealt with 

The Secretary of State for Work and Pensions lodged an appeal against the ruling on the cap.

We received the judgment from the Court of Appeal on 19 July 2021. The Court supported our one-off calculation approach for increasing payments to PPF and FAS members. It also confirmed the High Court’s decision that the PPF compensation cap, as set in legislation, is unlawful based on age discrimination and has to be disapplied. 

The Secretary of State for Work and Pensions has confirmed to the court that she will not appeal the ruling on the cap. The respondents have confirmed that they will not appeal further on the approach to calculating the Hampshire 50 per cent minimum. We’ve now started work to implement the judgment.

Click on the relevant questions below to find out what we're doing and what it means for you.

Questions about the 50 per cent requirement

How are you calculating the increase to make sure I’m getting at least 50% of my original benefits?
Who has received increased compensation so far?
Are there other members who might still be due an increase?
What are these other factors?
Will those other members receive their increase now you’ve got the decision from the Court of Appeal? When will they get it?
When will I get my arrears?
When arrears are paid, will they be taxed?
When arrears are paid, will they include interest?
Will there be any time limit on arrears of the 50% increase?
I’ve already sent you information about my former scheme benefits. 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. 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?

Questions about the compensation cap

Will you remove my cap now, and also pay me the arrears I’m due?
Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Will there be a time limit?
Can I take some of my increase as a tax-free lump sum?
When arrears are paid, will they be taxed?
I’ve not yet retired, but before this ruling would have been capped when I did so. What does this mean for me?

Questions on other court cases

I’ve heard there was another case at the CJEU, PSV v Gunther Bauer. Did this affect the amount of compensation you pay?
Does the July 2021 Court of Appeal judgment affect the 90% measure applied to compensation for those below normal retirement age when their employer failed?

Questions about the 50 per cent requirement

How are you calculating the increase to make sure I’m getting at least 50 per cent of my original benefits?

We're running a one-off valuation exercise to determine if the total actuarial value of your compensation is less than 50 per cent of your original scheme benefits. The Court of Appeal approved this approach. 

You can find out more detail in our factsheet on implementing the 50 per cent requirement

Who has received increased compensation so far?

We’ve increased payments up to the 50 per cent level of protection, on the basis of our original one-off valuation methodology, for all pensioners for whom the effect of the cap alone – either the standard cap or the long service cap - brought them below the 50 per cent minimum and who’ve sent us the information we asked for. 

We’ve also increased payments up to the 50 per cent level of protection for capped pensioners for whom the effect of the cap alone didn’t take them below the 50 per cent minimum but, when combined with other factors, they do fall below the threshold. 

As we work to disapply the cap, some of these pensioners will be due a further increase.

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

Yes. There are members who weren’t subject to the cap but whose benefits will need to be increased to bring them up to the 50% level of protection as a result of other factors.  

What are these other factors?

These 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, e.g. spouse’s benefits

It’s usually a combination of these other factors which leads to the requirement for an increase. 

Will those other members receive their increase now you’ve got the decision from the Court of Appeal? When will they get it?

We’ve already been collecting data and working on a model to calculate the increases due. We hope to be able to pay the increases due in the majority of cases by December 2022. 

It’ll take a bit longer to process if you have more complicated circumstances.

When will I get my arrears?

If you’re a capped pensioner, because we’re removing your cap you probably won’t fall below the 50% requirement any more. But you’ll get arrears of your uncapped compensation (see section below). 

If you’re not capped, but are affected by other factors, you’ll get your arrears at the same time as we increase your compensation.

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. 

When arrears are paid, will they include interest?

Yes. We’ll calculate the interest due at the rate as prescribed in legislation.

Will there be any time limit on arrears of the 50% increase?

We still need to finalise whether we’ll put a six-year time limit on arrears payments. We’ll make an announcement on this as soon as possible. 

I’ve already sent you information about my former scheme benefits. 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. Will you write to me asking me for additional information?

If you’re in the group of members who are below the 50% minimum level of protection only because of factors other than the cap, 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 will depend on your circumstances.  If you have the option to take part of your increase as a lump sum, we’ll write to you about this.

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?

Once our new calculation model has been built later this year, we’ll then check you are receiving at least 50% of the value of your former scheme pension and increase your compensation if you’re not.

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.    

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 ‘Hampshire’ 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.

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, would 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.

Questions about the compensation cap

Will you remove my cap now, and also pay me the arrears I’m due?

Starting in October 2021, we’ll be writing to all existing capped PPF pensioners who retired after their scheme entered PPF assessment to gather information about their Lifetime Allowance.  The amount we’re able to pay will depend on your Lifetime Allowance position.

We don’t need extra information from members who retired before their scheme entered PPF assessment. We’ll be in touch with those members once we’ve calculated their increase.  

We expect that it’ll take until the end of 2022 before we’re able to disapply it for the majority of currently-capped PPF pensioners.

We still need to finalise whether to put a six-year time limit on the payments. We’ll make an announcement on this as soon as possible. 

Do I need to contact you to make a claim for any arrears of what I lost due to the cap? Will there be a time limit on how much arrears you pay?

You don’t need to contact us.

We still need to finalise whether to put a six-year time limit on the payments. We’ll make an announcement on this as soon as possible. 

Can I take some of my increase as a tax-free lump sum?

If you retired after the date on which your scheme entered a PPF assessment period and after June 2014, you’ll have the option to take part of the increase to your compensation as a result of the disapplication of the cap as a lump sum.

If HMRC treats some or all of the lump sum as an unauthorised payment, the PPF intends to pay the unauthorised payments charge that would otherwise be payable by members. For members whose benefits exceed the lifetime allowance, some or all of the lump sum will be subject to a lifetime allowance tax charge. We’ll write to you with more detail about your options.  

We still need to finalise whether to put a six-year time limit on the payments. We’ll make an announcement on this as soon as possible. 

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. 

I’ve not yet retired, but before this ruling would have been capped when I did so. What does this mean for me?

We’re not applying the cap for future retirees.

Questions on other court cases

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

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

Does the July 2021 Court of Appeal judgment affect the 90% measure applied to compensation for those below normal retirement age when their employer failed?

The 90% measure wasn’t tested in this case although the Administrative Court did comment that the impact on those affected, although significant, doesn’t render the measure inappropriate or unnecessary. 

Keep up to date

You'll find updates in our latest news section.