Long-awaited changes to the Pension Protection Fund (PPF) compensation cap are facing continued delays, PP understands
The Department for Work and Pensions (DWP) legislation would provide an additional 3% of benefits for every year of service for savers with more than 20 years of service. The increased compensation would only apply from the date the legislation is enacted.
However, in a letter seen by PP, pensions minister Richard Harrington (pictured) said the draft regulations were not ready, and he would need further advice before deciding whether to proceed with implementation.
The proposal was originally introduced as primary legislation in 2013 by the then-pensions minister Steve Webb, with expectations it would be included in the 2014 Pensions Act.
However, the cap increase was delayed when, in March 2015, Webb said the changes would need to be made through secondary legislation.
A further delay was announced in January when the then-minister for disabled people Justin Tomlinson said a number of changes needed to be made before the secondary legislation could be laid before parliament.
However, in the letter to Pensions Action Group member Terry Monk, Harrington admitted the legislation was still not ready, and appeared to shy away from committing to increase the cap.
He wrote: "The department has not... indicated that the regulations dealing with the Pension Protection Fund long service cap are ready to be passed.
"They are not and, in any case, I am required by law to consult on these draft regulations before deciding whether to present them to parliament."
A DWP spokesperson clarified the minister could not commit to the legislation without following due parliamentary process, such as making a ministerial statement and conducting consultations.
They added there was no fixed timetable for the legislation yet, but that it would be laid before parliament sometime after the summer recess.
Monk criticised the ongoing delay as "heartless", arguing savers who would benefit from the legislation are losing out every day it is delayed.
"This is very disappointing and almost dismissive of the people affected, who by length of service are probably in their 60s and 70s," he said. "I would imagine some might have died waiting and therefore their spouses are also suffering.
"Steve Webb, and I believe Ros Altmann, fought for this and for the inclusion of the Financial Assistance Scheme (FAS), and indeed it was in the 2014 Pensions Act.
"Government needs to be reminded that the cost has been accepted. In summary, it is heartless."
Webb, who was pensions minister from 2010 to 2015, said Harrington's wording made it look as if the government was considering backtracking on the proposal.
He said: "Workers who have spent most of their working life with one firm should not have their pension cut back dramatically if their employer goes bust. The cap on payments from the PPF was always designed to catch ‘fat cats', and not long-serving works who have often given their lives to a business.
"It is very worrying that the DWP is now talking about ‘whether' to make the change rather than ‘when'. There is no excuse for further delay in implementing these changes, which parliament approved in principle back in 2014."
However, the DWP spokesperson denied the government was U-turning on the changes: "We are committed to the implementation of the PPF long service cap which will give additional compensation to anyone who has been capped and was a member of a pension scheme for over 20 years."
It comes as the Court of Appeal recently made a provisional judgement that the current compensation cap and restrictions on annual indexation increases may be at odds with EU law. The court has referred the decision to the Court of Justice of the European Union (CJEU).
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