Pension Protection Fund Bridging Pension Draft Regulations Published

Bridging pensions allow individuals who retire before reaching State Pension age to be paid a higher rate of pension initially. The bridging pension then reduces when the individual begins to receive their State Pension or reaches an age specified in their pension scheme rules.

Between 31 August and 1 October 2017, the government ran a consultation which sought views on its preferred approach to address the PPF bridging pensions anomaly by actuarially converting the bridging pension into a flat-rate lifetime equivalent amount (known as smoothing). The vast majority of those who responded to the consultation agreed that the government should legislate to correct the PPF bridging pension anomaly. However, a significant proportion of respondents expressed a preference for the alternative approach set out in the consultation, one based on the rules of the original scheme. After careful consideration of the responses, the government has decided to address the PPF bridging pension anomaly by more closely aligning with the approach that schemes would have taken.

So a further technical consultation has been published seeking to establish whether the new draft regulations achieve the policy intent.

The changes to PPF compensation rules will come into effect in February 2018, subject to Parliamentary procedures.

The draft Pension Protection Fund (Compensation) (Amendment) Regulations 2017 would allow the Pension Protection Fund (PPF) to take account of bridging pensions by smoothing the amount of PPF compensation over the individual’s lifetime.

The consultation seeks views on:

• the implications of the government’s preferred option to allow the PPF to take account of bridging pensions by smoothing the amount of PPF compensation over the individual’s lifetime
• whether the draft regulations achieve their intended purpose

The consultation closed on 3rd December 2017.