Compensation
The PPF pays two levels of compensation:
- Any member who is over their normal retirement age or who retired early due to ill health will receive 100% of the pension they are currently receiving.
- Other members will receive the 90% level of compensation capped at a certain level. For the year from 1 April 2011, the cap is £33,219.36 per annum for members at age 65.
The PPF also offers a dependent's pension of half the member's entitlement.
In the period prior to payment pension increases at the lower of 5% per annum compound or the increase in the Retail Price Index. After retirement all pension relating to service after 5 April 1997 increases each year at 2.5% or the increase in the retail price index if lower; while all pension relating to service before 6 April 1997 will not increase.
Although the PPF is often billed as providing a guarantee to members' pensions, the amount of compensation is less than a member would have been entitled to under the rules of their original pension scheme. This is partly due to the compensation cap and 90% restriction on benefits but also because the indexation provided by the PPF may not be as generous as that otherwise provided by the scheme.
Furthermore, if at some point in the future the PPF has insufficient funds to pay benefits then the level of benefits or increases can be restricted. However, the levels of compensation are set in primary legislation, so changing these levels would require an Act of Parliament to do so.
Read more about this topic: Pension Protection Fund
Famous quotes containing the word compensation:
“Many old people receive pensions for no other reason, it seems to me, but as a compensation for having lived a long time ago.”
—Henry David Thoreau (1817–1862)
“I do not want to be covetous, but I think I speak the minds of many a wife and mother when I say I would willingly work as hard as possible all day and all night, if I might be sure of a small profit, but have worked hard for twenty-five years and have never known what it was to receive a financial compensation and to have what was really my own.”
—Emma Watrous, U.S. inventor. As quoted in Feminine Ingenuity, ch. 8, by Anne L. MacDonald (1992)
“Senators and presidents have climbed so high with pain enough, not because they think the place specially agreeable, but as an apology for real worth, and to vindicate their manhood in our eyes. This conspicuous chair is their compensation to themselves for being of a poor, cold, hard nature.”
—Ralph Waldo Emerson (1803–1882)