New court proceedings have started against the Pension Protection Fund (PPF), challenging its intended approach for calculating increases for savers affected by a previous European court ruling.

In September 2018, the Court of Justice of the European Union (CJEU) ruled that PPF members should receive no less than 50 per cent of their pension savings if their employer becomes insolvent,

The PPF is already required by UK law to pay at least 90 per cent of a scheme members benefits if they are transferred into the pensions lifeboat whilst still working.

However, there is currently a cap of £39,000 on the amount that can be paid out to members each year once they reach the age of 65, meaning that high-earners could be left with less than 10 per cent of their entitled benefits.

The government plans to increase this to £40,020 in April 2019.

The PPF outlined its planned approach in uplifting payments to those affected by the CJEU ruling in January 2019.

However, the pensions lifeboat has revealed that fresh court proceedings have been brought against the way it intends to calculate increases owed to its affected members.

Despite the fresh challenge, the PPF will continue with its plan to pay increases, but it will limit the size of arrears payments in an attempt to avoid the risk of having to recover overpayments if the court rules it must use a different approach in calculating the increases.

In an update, the PPF stated: “We’ve thought carefully about whether we should stop all work to implement the ruling in light of the new court proceedings. For the time being, we’ve concluded that it's right to continue with our plans to pay increases to affected members.

“We expect our proposed approach to lead to higher payments in the near term than some of the alternatives the court is being asked to consider. Interest will continue to accrue on the arrears.

“At this time we can’t say when the court case may start or end, although the court may be asked to deal with the case quickly. We will keep our approach to implementation under review in the light of how the proceedings develop.”

Share Story: