High Court rules on the PPF compensation cap and benefits following the Hampshire decision – Jonathan Hazlett comments

Written on 24 June 2020

A key feature of the Pension Protection Fund’s benefit structure is unlawful on age discrimination grounds. The High Court’s ruling on 22nd June held that the PPF’s compensation cap currently set at £41,461 at age 65, was unlawful.

Jonathan Hazlett, Head of Pensions at Osborne Clarke LLP, commented: 

“The decision that the compensation cap amounts to unlawful age discrimination is a real surprise.  For members whose benefits are capped, it is good news.  However, the majority of members are not caught by the cap and the judgment confirms that removing it is expected to have a limited impact on the PPF and levy payers.”

“It is great to hear that, subject to any appeal, the court has approved the PPF’s ‘once and for all’ approach to checking whether members’ benefits need to be adjusted for the Hampshire judgment.  Although the PPF will need to make some changes around actuarial assumptions and survivor benefits, the decision avoids the time and expense that would have been involved in checking, every year, that PPF compensation is at least 50% of the original scheme benefit.  Similarly, the decision that there is a 6 year limitation period for claims against the PPF for arrears of compensation might not be seen as good news by members, but will help to simplify the process of correcting benefits.”

“The judgment isn’t just important for the PPF.  It suggests that the trustees of schemes in a PPF assessment period should be paying benefits in line with the Hampshire judgment instead of the current PPF compensation rules.  If you are the trustee of a scheme in an assessment period, or the trustee of a scheme which is preparing for a PPF+ buy out, you will need to talk to your advisers.”

There is detailed analysis of the decision in our Insight.

If you are a journalist and want to speak to Jonathan or another of our specialist PPF pensions lawyers, please contact Katy Saunders or Chris Bond.

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