On Monday 22nd June 2020, the High Court ruled it was unlawful for the Pension Protection Fund (PPF) to cap compensation payments to some members who transferred to the scheme following the collapse of their employer.
Under the PPF scheme’s rules, workers whose pensions are taken over by the PPF before they reach retirement age only receive 90 per cent of their expected benefits up to a limit of £41,000 at age 65.
By contrast, the PPF does not cut compensation for those who have reached pensionable age when their funds are transferred to the scheme.
British Airline Pilots Association (BALPA) brought the case on behalf of its members who worked for BMI and Monarch. BMI’s pension scheme was transferred to the PPF in 2012 after Lufthansa sold the airline to IAG. Monarch collapsed in 2017.
In a statement, BALPA said “Many of our members who used to fly for Monarch and BMI have suffered a huge detriment because of the unlawful PPF compensation cap, which resulted in many of them getting much less than their contracted pension scheme benefits, sometimes less than half of the pension they were expecting.”
The High Court agreed and found in favour of BALPA on grounds of age discrimination. Currently, about 600 individuals are subject to the compensation cap. The former Pensions Minister, Sir Steve Webb, says the decision could have wider age discrimination implications for the whole principle of only paying 90 per cent compensation across the board for those under pension age.
If the judgement stands, it is likely to have an impact on the funding level of the PPF and the levy paid by schemes and employers to support the PPF.
The PPF and Department for Work & Pensions are considering their response to the judgement and in the meanwhile, PPF members affected will continue on their current level of benefits.