Source · Select Committees · Work and Pensions Committee
Recommendation 21
21
Acknowledged
Paragraph: 151
Legislate to provide indexation on pre-1997 PPF compensation rights and review post-1997 cap
Conclusion
Non-indexation of pre-1997 benefits has had a significant impact on PPF members and disproportionately on older members and women, reducing the value of their compensation in real terms. Given the £12 billion in PPF reserves, the potential impact on levy payers is no justification for continuing this policy. We welcome the fact that the Government will be consulting on levy changes and PPF compensation levels. It should legislate to provide indexation on compensation in respect of pre-1997 rights where scheme rules provided for that. It should work with the PPF to consider 58 Defined benefit pension schemes other changes to compensation—such as raising the cap on indexation of post-1997 benefits above 2.5%—as part of its forthcoming consultation on levy changes and PPF compensation levels.
Government Response Summary
The government acknowledges the issues raised by PPF and FAS members regarding pre-1997 indexation, states it is taking advice on options, and will continue to work with the PPF to balance stakeholder interests.
Paragraph Reference:
151
Government Response
Acknowledged
HM Government
Acknowledged
We are aware of the issues raised by members of the PPF and the FAS about the level of compensation offered for benefits accrued before April 1997. The Minister for Pensions has met with relevant stakeholders to discuss this issue, and this Government recognises that the rules on pre-97 indexation on PFF and FAS have been the subject of much discussion. Assets and liabilities for the PPF are reflected within the Government accounts, and any use of the PPF reserve and increases in future liabilities have an impact on the public finances. Ministers continue to take advice on options, we will need to work through the issues to ensure a balance can be struck between all parties, including the interests of members of failed schemes, the levy payers who support the PPF and taxpayers. This is an important issue, and one where we will continue to work with PPF.