Pensions - Articles - Comment on rumours PPF cap may become linked to service

 It has been suggested that Steve Webb may be about to announce that the fixed cap on pension benefits provided by the Pension Protection Fund is to be replaced by a cap that depends on the length of a member’s pensionable service.

 Commenting on the speculation, John Broome Saunders, Actuarial Director at Broadstone, said:

 “Whilst this is good news for longer-serving members of pension schemes, there will be pressure to avoid increasing the overall cost of the PPF – which may mean that the cap on benefits for shorter-service members could increase. It could also dramatically change the behaviour of some trustees of schemes with struggling employers. We have seen several cases where trustees who are also long-serving senior employees, have diligently tried to prevent schemes falling into the PPF, to ensure that their personal benefits are not reduced as a result of the PPF cap. If a more generous cap is to apply to such members, then their reticence to facilitate entry into the PPF may evaporate.”