Paragraphs 26 and 27 of Schedule 7 of the Pensions Act 2004 set out the circumstances in which the compensation cap applies and how and when it should be increased. In July 2021 the Court of Appeal ruled the PPF compensation cap was unlawful on the grounds of age discrimination, so we’re no longer applying it and we’re removing it from affected PPF pensioners. 

The information below is provided for advisers who still need to refer to previous calculation tables and factors.

The compensation cap was also used in valuation calculations required under Sections 179 and 143 of the Pensions Act 2004. You can find out more about how it was applied under these sections in valuation guidance.

Compensation cap changes

From 1 April each year, the compensation cap was reviewed to reflect the increase in the general level of earnings in Great Britain since the previous tax year. The cap also varied with the scheme member's age last birthday.

If needed, you should use the following tables for calculating compensation and for Section 143 and 179 valuations with effective dates:

Previous periods

You can also view factors that were valid for previous periods

Factors to calculate the value of an annualised lump sum

The compensation cap had to be compared with an annual value of benefits.

These factors were used to work out the application of the compensation cap. They applied only to annualised cash lump sum benefits, which had been accumulated alongside pension benefits. They didn't apply to lump sums resulting from commutation. 

Please note that factors for those under age 50 may be needed for the purposes of a Section 179 valuation, where cash lump sum benefits have accrued on death before retirement.

The factors, required by paragraph 26 (7) of Schedule 7 of the Pensions Act 2004, are set out in the tables below and should be used for calculations with effective dates: