The Government is reviewing the structure of the Pension Protection Fund compensation cap to reflect how long an employee has worked for a company.
The PPF is a lifeboat fund for members of defined-benefit pension schemes whose sponsoring employer has gone bust.
If an individual’s employer fails before they reached retirement age, they will receive compensation worth 90 per cent of the value of their pension at the time. This figure is capped at £34,049.84 per year.
Speaking in a House of Commons debate last week, pensions minister Steve Webb (pictured) said: “I have become increasingly concerned the cap for those who have not reached scheme pension age acts in a penal way, and not on the people it was intended to affect – the fat cats who might have had a moral hazard issue – but on long-serving workers.
“I have asked my officials to look at options for reforming the PPF cap, and one possibility is for the cap to vary with length of service. For example, there would be a floor cap and then one that increased according to how long the person had been in the scheme.”
AWD Chase de Vere head of communications Patrick Connolly says: “The Government must strike the right balance between fairness and affordability. It is sensible that the PPF cap is reviewed and it is likely there will be a fairer way which takes account of how long someone has worked for the company.”