Recommendation 8

Since the scheme entered the PPF, members have lost money in real terms each year because the compensation they receive does not include rises for inflation. PPF compensation initially provides members 100% of their pension if they had already reached the scheme’s normal pension age, or 90% for those who had not. Compensation on pensions earned after 6 April 1997 increases each year in line with inflation, up to a maximum of 2.5%. However, benefits accrued before 6 April 1997, including all benefits transferred in 1996, are not increased for inflation at all.13 Scheme members who wrote to us described the damaging effects of the loss of inflation protection on many years of pension benefits, in one case losing over 40% of their pension in real terms.14 We asked 6 Q 2 7 C&AG’s Report, para 1.10 8 Qq 15, 20, 23–26, 53 9 Q 32; C&AG’s Report, para 1.9 10 Q 33; C&AG’s Report, para 1.11 11 Qq 52, 54–55 12 Q 54; C&AG’s Report, para 1.13 13 Q 79; C&AG’s Report, para 2.6 14 ATC0001; ATC0004; ATC0016; ATC0022 AEA Technology Pension Case 9 DWP whether the mechanism used to provide restitution for Equitable Life pensioners could be used in this case. DWP was unable to comment on any comparison to Equitable Life, but responded that the PPF was the mechanism government had set up to provide compensation in cases such as AEAT’s.15 The government’s response to complaints