In a previous blog post we informed you that the Court of Justice of the European Union (ECJ) had published its decision in Grenville Hampshire v The Board of the Pension Protection Fund [2018] (case C-17/17).
The ECJ accepted the opinion of the Advocate General, ruling that Pension Protection Fund (PPF) compensation limits which result in members receiving less than 50% of their original pension entitlement are unlawful. It is expected that the majority of members who will be affected by the ruling are those whose PPF compensation is capped and/or those for whom there is a difference between the indexation/revaluation rates that were due in their original scheme and in the PPF.
PPF Guidance
It is expected that the government will introduce legislation in order to implement the court ruling but there is some uncertainty around what should be done in the meantime. In November 2018 the PPF released a guidance note detailing how they proposed to calculate if an increase was due to a member.
The PPF followed up with an announcement in December 2018 explaining that it was first assessing the position of pensioners who were subject to the long-service cap, after which it would deal with pensioners subject to the standard compensation cap, before considering all other cases. The PPF are still working on their final methodology for PPF pensioners and have said that this will be published as soon as possible as an interim approach, until new legislation comes into force or there are further court rulings. Such further developments have perhaps come sooner than the PPF were anticipating with the announcement on 14 February 2019 that new court proceedings have been issued against the PPF.
New Court Proceedings
In summary, the PPF’s proposed approach was to undertake a one-off calculation for affected members under which they would;
- assess the total actuarial value of the member’s benefits payable from the employer’s insolvency date; and
- compare it against the total actuarial value of their PPF benefits payable from that same date.
Thus, if the latter is less than 50% of the former, the PPF will increase the member’s benefits until the 50% threshold is met.
The new court proceedings seek to challenge this approach.
The impact?
The PPF have decided that they should, and will, continue with plans to pay increases to any affected members. However, they will limit the size of arrears payments in order to reduce the risk of needing to recover overpayments from such members in future, should another approach for calculations be preferred by the court.
There is no further information on when the case is likely to commence but it is possible that the court will be asked to expedite the case. Until then, the PPF will keep their approach to implementation under review as the proceedings develop.