Retirement savers expecting a cash windfall after the level of benefits paid by the Pension Protection Fund were ruled unlawful can expect to wait for their money.
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Last month, the European Court of Justice decided that any PPF payments that amounted to less than 50% of their pre-insolvency entitlements were too low.
The PPF caps the maximum amount high earners can expect if a company pension is taken over by the fund.
Letters have gone out to around 50 retirement savers impacted by the ruling and more are in the pipeline.
The PPF has told them they will not receive any extra money until the government passes a new law detailing how new rules on revaluing and indexing their pensions will apply.
More data needed
However, the PPF has confirmed that no retirement saver will be financially disadvantaged as the new rules will apply from the day the fund took over their pensions.
The PPF also admitted that how much the ruling will cost is unknown.
The figure was thought to be around £215 million.
Pensions Action Group committee member Terry Monk explained the PPF must deal with how pre-1997 funds affected by the Financial Assistance Scheme will be handled.
“We welcome the announcement by the PPF in that members are being kept informed,” he said. “However, we need to see a lot more detail and figures so that we can understand the basis quoted of calculating underpayments both historical and in the future.
Pay up, says former minister
“We clearly need to see further expert advice on this and why ‘solvents’ are currently excluded when, in my case, the employer went into liquidation before FAS started and FAS accepted the scheme and dividends from the insolvency as a creditor.”
Former pensions minister Steve Webb argues that the PPF should pay compensation without waiting for legislation that could take some time to arrive.
“Given the pressure on parliamentary time, it could be months, if not years, before legislation could be passed to change the rules,” he said. “In the meantime, many of these workers would have to get by on far less than they had originally expected.”
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