Workplace Pensions
The question
To ask the Secretary of State for Work and Pensions, with reference to the oral evidence provided by the Minister for Pensions to the Work and Pensions Committee on defined benefit pension schemes on 10 January 2024, Session 2023-24, HC 144, what plans she has to review the (a) indexation, (b) 90% compensation cap and (c) potential merits of other changes to the Pension Protection Fund; and whether she plans to consult on potential changes to that Fund during this Parliament.
Answered by Emma Reynolds
I have heard about the problems experienced by Defined Benefit pension scheme members adjusting to an income in retirement which may be less than they were expecting following the insolvency of their employer. I recognise the importance of these issues for members and will consider this further in the coming months.
Pension Protection Fund compensation payments based on benefits accrued on or after 6 April 1997 are increased in line with the Consumer Price Index, capped at 2.5 per cent. Before 6 April 1997, there was no general statutory requirement for defined benefit pensions to be increased when in payment, apart from any Guaranteed Minimum Pension element earned on or after 6 April 1988.
There is no cap to Pension Protection Fund compensation. Compensation is calculated at the date of employer insolvency and, at that date, is initially either 100 per cent of their accrued pension benefits for members over their scheme's normal pension age or 90 per cent of their accrued pension benefits for members below their scheme’s normal pension age.
Verbatim has judged this answer against the question that was actually asked — answered, partly answered, or evaded. Sign in to see the verdict →