The compensation provided by the Pension Protection Fund (PPF) will be different to the pension you would have been paid by your pension scheme.
There are two key elements to the compensation, the level of the compensation and how your compensation will increase in retirement.
The level of the compensation you will receive if your scheme enters the PPF is complex to calculate. Broadly, members who are under pension age when their scheme enters the PPF receive 90% of the starting level of pension they were expecting under the rules of their previous scheme and those over pension age will receive 100%. The level of compensation is subject to an overall cap on the maximum level of compensation. This cap increases for those with over 20 years’ service.
The increases in retirement are different for compensation relating to service before and after April 1997. Compensation relating to service before April 1997 receives no increases in retirement. Compensation for service after April 1997 increases in line with the Consumer Price Index (CPI) capped at a maximum of 2.5%. In real terms the value of the compensation can be eroded by increases in price inflation measured by CPI. This is very acute for members with service before April 1997.
Members can read our detailed briefing on PPF compensation on the Prospect Library.
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