Draft PPF regulations retain effects of Hampshire and Hughes judgments

On September 18, 2023, draft regulations on PPF compensation were laid before Parliament, made under the restatement powers of the Retained EU Law (Revocation and Reform) Act 2023 (the Act). The Act permits "secondary retained EU law" (which includes retained case law) to be restated in regulations and also allows a restatement to use different words or concepts from those used in the original law in order to resolve ambiguities.

The need for the restatement arises because after December 31, 2023, retained EU law will cease to have effect in domestic law. The Government's policy is to retain the effects of the judgments in the Hampshire case, where the ECJ found that former employees should receive at least 50 per cent of the value of their accrued pension benefits on their employer's insolvency, and the Hughes case where the Court of Appeal upheld a previous High Court judgment that disapplied on grounds of age discrimination the PPF compensation cap applying to members below their scheme's normal pension age. 

Under the powers in the Act, the draft Pensions Act 2004 (Amendment) (Pension Protection Fund Compensation) Regulations 2023 will:

• Revoke the compensation cap provided for under the Pensions Act 2004.
• Introduce a new provision for schemes with an assessment date on or after January 1, 2024, so that compensation payable must be adjusted to secure that its value at the beginning of the assessment period is equal to 50 per cent of the benefit value immediately before the assessment date.