Financial Assistance Scheme

Baldytyke88

I received a letter today from the Financial Assistance Scheme. It seems to say that a law has been passed to allow interest on pensions from pre 1997. It seems strange to back date a law so far back.

I don't recall many details about this old pension, I believe I got a small lump sum from a previous employers pension, which went into liquidation.. Although the interest could be small, if it has interest on interest, it could be worthwhile.

I guess this law change will apply to thousands of peoples pensions.

DRS1

Are you sure it is about interest? It may be pension increases see thread below

Good news about your PPF compensation — MoneySavingExpert Forum

Baldytyke88

Thanks, I received a letter today, so not instant like an email. It does look like the same issue.

hugheskevi

https://forums.moneysavingexpert.com/discussion/6678690/financial-assistance-scheme

It is about indexation relating to pre-97 accruals of pension that ended up in the FAS or PPF.

When the Financial Assistance Scheme and the Pension Protection Fund were set up, they provided statutory minimum provision for the compensation pension payments made. As there was no statutory requirement to index pension accrued before 1997, no indexation of pre-97 accruals was provided in FAS or PPF.

There were subsequent court judgments that PPF compensation had to be at least 50% of the pension that would have been paid. Everyone references the 90% protection level, but due to the removal of indexation, over time the amount of compensation provided falls as a percentage of what would have been paid, and over many years can fall below 50%. Hence PPF has to track that percentage and ensure they are paying that.

Due to the increase in interest rates, the PPF financial position has markedly improved, so there are surplus funds available. FAS is funded out of Govt revenues, but many of the FAS beneficiaries have died or are very elderly. Also, the erosion of the pension due to little or no uprating has reduced the cost of indexation.

Hence the change in law to move from statutory minimum to scheme-specific rules for indexation of pre-97 accruals, given that a surplus is available in the PPF, and the cost is low for FAS. But note it is only with prospective effect, no backdating.