From 1 April 2009 the PPF compensation payable to defined benefit pension scheme members is capped at £31,936.32 pa (except for those who immediately before the assessment date have already reached NPA, or are receiving an ill-heath pension or a survivor's pension: they get full compensation). This figure, representing a 3.5% increase from 2008/09 in line with the general increase in earnings, was ratified in The Pension Protection Fund (Pension Compensation Cap) Order 2009 (SI 2009/795) (see earlier Aries report).

However, no-one whose benefits are subject to the cap, including those scheme members who have taken early retirement, will actually get as much as this. Because their compensation is limited to 90% of what they were entitled to, the maximum is 90% of the cap, ie from 1.4.09 £28,742.68. The average payout to people whose schemes have transferred into the PPF is £4,000 a year.

Meanwhile The Pensions Act 2008 (Commencement No. 3 and Consequential Provisions) Order 2009 (SI 2009/809) has brought into force provisions in the Act affecting the calculation of PPF compensation to which those who were active members of the scheme immediately before the PPF assessment date will become entitled on reaching NPA. From 6 April 2009, the lower (ie 2.5%) revaluation cap will apply in relation to pensionable service accrued after that date.

Other new legislation relating to the PPF and the FAS

The Occupational Pension Schemes (Levy Ceiling) Order 2009 (SI 2009/794) was formally made on 26 March following approval by Parliament (see earlier Aries article). This Order specifies the maximum PPF levy for the financial year beginning on 1 April 2009 as £863,412,967 (a 3.6% increase on last year).

On the same date The Financial Assistance Scheme and Incapacity Benefit (Miscellaneous Amendments) Regulations 2009 (SI 2009/792) was also made (see earlier Aries article). These allow for early unreduced payment of assistance for qualifying members who are aged 55 or over, who are not terminally ill, but have a significantly shortened life expectancy.

On 2 April the DWP issued a technical consultation on draft guidance for actuaries on method and assumptions to use when undertaking a valuation for relevant FAS qualifying schemes. The government anticipates that valuations will be required for all FAS qualifying schemes that will transfer some or all of their assets to the Government. This follows the Government's decision to take the remaining assets in FAS qualifying schemes that have yet to complete winding up (as the scheme is funded by the taxpayer, unlike - so far - the PPF). The closing date for responses is 15 May 2009.

The PPF has published Good Practice Guides for trustees of schemes that have qualified for the FAS and are in the process of winding-up, and separately for trustees of schemes eligible for the PPF on the process required to take a pension scheme through the assessment period.

Other recent legislation

The GMP conversion regs, entitled The Occupational Pension Schemes (Contracting-out) (Amendment) Regulations 2009 (SI 2009/846) have been made following Parliamentary approval (see previous Aries article), and came into force on 6 April 2009. The Regs insert new sections 69A and 69B into the 1996 Occupational Pension Schemes (Contracting-out) Regs (SI 1996/1172). The continuing requirement to provide for survivor benefits and the absence of official guidance on equalisation - a necessary precursor for conversion of GMPs into ordinary scheme benefits - are widely viewed as a significant deterrent to adopting the process.

The LEL and UEL weekly figures for 2009/10 of £95 and £844, previously reported here when presented to Parliament in draft, have been confirmed by The Social Security (Contributions) (Amendment No. 2) Regulations 2009 (SI 2009/591), along with the primary and secondary earnings thresholds (£110). In the 2007 Budget it was announced that from April 2009 the UEL would be aligned, as far as possible, with the level at which higher rate income tax is payable: hence the huge leap in the UEL from £770 in 2008/09 to £844 pw this year.