After 31 December 2023, retained EU law – including case law – will cease to have effect in domestic law unless restated explicitly. This affects the Pension Protection Fund (PPF) because the rules governing the compensation that it pays have been amended in recent years by judgments passed in the European Court of Justice (ECJ): specifically the Hampshire, Hughes and Bauer cases.
- In the Hampshire case, the ECJ found that former employees should receive at least 50 per cent of the value of their accrued pension benefits on their employer’s insolvency.
- In the Hughes case, the Court of Appeal upheld a previous High Court judgment that disapplied the PPF compensation cap which applied to members below their scheme’s normal pension age, on grounds of age discrimination.
- The Bauer judgment involved assessing a member’s compensation in relation to the risk of the member being in poverty.
In September, draft regulations on PPF compensation were laid before Parliament, in order to retain in UK law the effects of the Hampshire and Hughes judgments (though not the Bauer judgment).
These regulations will:
- revoke the compensation cap that was introduced by the Pensions Act 2004 and
- introduce a new provision for schemes with an assessment date on or after 1 January 2024, such that compensation payable must be adjusted (if necessary) so that its value at the beginning of the assessment period is equal to at least 50% of the benefit value immediately prior to the assessment date.