PPF Pre-97 nil increase

onesixfive

My husband has been paid via PPF for one of his pensions since 2015.
Only recently we queried why the PPF was not index-linked/inflation-proofed.
Not noticing the miniscule difference we've always wondered why the monthly amount had apparently never altered since day one.

On looking at his PPF schedule of payments, it seems his compensation is calculated from 2 split amounts pre & post 1997.

It includes a small amount Post 1997 which has resulted in a rise of less than £10 a YEAR!
However he has a much larger Pre-1997 amount which apparently does not attract ANY increases.

Why is this please?

hyubh

onesixfive said:

My husband has been paid via PPF for one of his pensions since 2015.
Only recently we queried why the PPF was not index-linked/inflation-proofed.
Not noticing the miniscule difference we've always wondered why the monthly amount had apparently never altered since day one.

On looking at his PPF schedule of payments, it seems his compensation is calculated from 2 split amounts pre & post 1997.

It includes a small amount Post 1997 which has resulted in a rise of less than £10 a YEAR!
However he has a much larger Pre-1997 amount which apparently does not attract ANY increases.

Why is this please?

PPF compensation when it comes to increases reflects the statutory minimum for non-GMP ('excess') pension. Before 1997, schemes did not have to provide any increases in payment except on post-88 GMP, and when that changed, it was only for pensionable service going forward. As such, pension before and after April 1997 attract different statutory minimum pension increases, and therefore, different treatment if the scheme falls into the PPF. (GMP complications are also done away with through GMP pension effectively being converted into excess when the opening PPF compensation is calculated.)

onesixfive

PPF compensation when it comes to increases reflects the statutory minimum for non-GMP ('excess') pension. Before 1997, schemes did not have to provide any increases in payment except on post-88 GMP, and when that changed, it was only for pensionable service going forward. As such, pension before and after April 1997 attract different statutory minimum pension increases, and therefore, different treatment if the scheme falls into the PPF. (GMP complications are also done away with through GMP pension effectively being converted into excess when the opening PPF compensation is calculated.)

Thanks for that.
 I'm not clear about Guarantee Minimum Pension - I've googled it & see it's the least amount you'll get from your pension scheme by law if you worked between 6 April 1978 and 5 April 1997.
I still cannot see how this would affect why pre-1997 amounts still do not attract any PPF increases tho ?

hugheskevi

onesixfive said:

PPF compensation when it comes to increases reflects the statutory minimum for non-GMP ('excess') pension. Before 1997, schemes did not have to provide any increases in payment except on post-88 GMP, and when that changed, it was only for pensionable service going forward. As such, pension before and after April 1997 attract different statutory minimum pension increases, and therefore, different treatment if the scheme falls into the PPF. (GMP complications are also done away with through GMP pension effectively being converted into excess when the opening PPF compensation is calculated.)

Thanks for that.
 I'm not clear about Guarantee Minimum Pension - I've googled it & see it's the least amount you'll get from your pension scheme by law if you worked between 6 April 1978 and 5 April 1997.
I still cannot see how this would affect why pre-1997 amounts still do not attract any PPF increases tho ?

GMP has some mandatory increases attached to it for pension accrued during the later part of the 1978-97 period, excess over GMP did not have any such requirements prior to 1997. So by effectively converting GMP into excess over GMP there are no requirements around uprating the GMPs accrued before 1997.

The PPF pays PPF compensation, which has a benefit structure that is largely standardised across all members. In particular, it does not seek to replicate all the details of original scheme benefits.

For the period before 1997, uprating of benefits under individual scheme rules could have been nothing, discretional, or things such as inflation-linked with a cap or a fixed rate. 

If the PPF offered pre-97 indexation some members would have received higher indexation under PPF than they would have received from their scheme. The funding of PPF is challenging, as it levies fees on existing pension schemes to fund those that fail. Hence it is difficult to justify funding more than the statutory minimum required, especially where that could have been more generous than a member would have received under their original scheme.

hyubh

onesixfive said:

PPF compensation when it comes to increases reflects the statutory minimum for non-GMP ('excess') pension. Before 1997, schemes did not have to provide any increases in payment except on post-88 GMP, and when that changed, it was only for pensionable service going forward. As such, pension before and after April 1997 attract different statutory minimum pension increases, and therefore, different treatment if the scheme falls into the PPF. (GMP complications are also done away with through GMP pension effectively being converted into excess when the opening PPF compensation is calculated.)

Thanks for that.
 I'm not clear about Guarantee Minimum Pension - I've googled it & see it's the least amount you'll get from your pension scheme by law if you worked between 6 April 1978 and 5 April 1997.
I still cannot see how this would affect why pre-1997 amounts still do not attract any PPF increases tho ?

It doesn't, any GMP is converted to 'equivalent' excess in order to make PPF compensation completely standardised. This helps keep the PPF's running costs low (the benefit structures of DB schemes, especially private sector ones, can get crazily complicated).

I mentioned GMP only because GMP accrued from April 1988 does require index linking by schemes, albeit capped to 3%. This no longer applies when a scheme falls into the PPF however, since the GMP is converted at that point.

The_Green_Hornet

onesixfive said:

My husband has been paid via PPF for one of his pensions since 2015.
Only recently we queried why the PPF was not index-linked/inflation-proofed.
Not noticing the miniscule difference we've always wondered why the monthly amount had apparently never altered since day one.

On looking at his PPF schedule of payments, it seems his compensation is calculated from 2 split amounts pre & post 1997.

It includes a small amount Post 1997 which has resulted in a rise of less than £10 a YEAR!
However he has a much larger Pre-1997 amount which apparently does not attract ANY increases.

Why is this please?

The PPF website has a section regarding compensation indexation which you may find useful.

Will my pension increase? | Pension Protection Fund (ppf.co.uk)

westv

I'm another one with a PPF rescued pension for service prior to 97. I'm glad that I do have at least something but am aware that over time inflation will cause it to wither away.

hugheskevi

westv said:

I'm another one with a PPF rescued pension for service prior to 97. I'm glad that I do have at least something but am aware that over time inflation will cause it to wither away.

It can erode very quickly - lots of people say PPF compensation will give you 90% of the pension, but the guarantee is actually only 50% once the loss to inflation is taken into account.

onesixfive

westv said:

I'm another one with a PPF rescued pension for service prior to 97. I'm glad that I do have at least something but am aware that over time inflation will cause it to wither away.

Hi - it was an article in Saga magazine detailing these Deprived Pensioners Association call for fair indexation which drew us to query the PPF payments in the first place.

onesixfive

hugheskevi said:

westv said:

I'm another one with a PPF rescued pension for service prior to 97. I'm glad that I do have at least something but am aware that over time inflation will cause it to wither away.

It can erode very quickly - lots of people say PPF compensation will give you 90% of the pension, but the guarantee is actually only 50% once the loss to inflation is taken into account.

I agree, and the Deprived Pensioners Association call for fair indexation cause seems to pick up on the point.

westv

Thankfully my PPF pension is only 9 years of my 36 years of pension accumulation (the rest is DC) although it would have been more if I'd been allowed to access the DB scheme when I started there at 16 rather than 25.