Hundreds of thousands of retirees are about to receive some good news as they will get a share of a £2 billion 'gold-plated' pension payout. The Pension Protection Fund (PPF) is set to announce that around 330,000 people are eligible for a payout.
What Is the Pension Protection Fund?
The PPF was established to protect people in 'defined benefit' (DB), or final salary, pension schemes if their employer becomes insolvent. Administered by the Department for Work and Pensions (DWP), the PPF pays compensation when a pension scheme lacks sufficient funds to provide the promised pension, provided the scheme is eligible.
Defined benefit pensions, often called 'gold-plated', were offered by private companies in industries such as rail, banking, and coal mining. However, DB pots were closed to new joiners in the early 2000s after they became too costly for employers due to the UK's ailing economy and longer life expectancies.
Legal Loophole Closed
According to the Mail on Sunday, many people moved to the PPF from DB schemes lost out on payments because employers were not obliged to pay inflation-linked increases for work accrued before 1997. This legal loophole has now been closed under the Pension Schemes Act, which became law last month. The change means pensioners will finally be compensated for loss of earnings due to their pensions not keeping up with rising costs.
The newspaper reports that payout amounts could average around £300 a year and will be paid monthly from January. Future increases will be capped at 2.5%.
PPF Statement
A PPF spokesperson told the Mail on Sunday: “Members of the T&N Retirement Scheme can be reassured that their pensions continue to be protected by the PPF. Our focus is to continue working with the trustee and other parties to ensure a smooth transfer of the scheme and its members to the PPF. Many of the scheme’s members may now receive more than originally expected in PPF compensation due to recent legislative changes which enable the PPF to pay increases on pre-97 benefits going forward.”
