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Dear Becky,
I am currently in receipt of the basic state pension, having missed out on the “good one” by eight days (thank you so much, George), a civil service pension for service between 1968 and 1984, and a pension based on employment with House of Fraser between 1985 (you had to work for a year to qualify) and 2011.
Everything was hunky-dory until the pension went into the PPF (Pension Protection Fund), which meant that whatever pension I had “earned” before April 1997 was frozen, and pension that was earned later was limited to 2pc.
Strangely, even though I was on a really good salary by the time I retired (and paying 13pc of my salary in contributions), and despite the fact that in my early days the pension fund had been doing so well we all had contribution holidays, the vast majority of my pension is classed as pre-1997.
Not great – but I could accept that PPF was that way, and it was only a temporary situation. Or so I thought.
Eventually, the pension came out of PPF and was taken over by Pension Insurance Corporation, and amazingly my pre-1997 pension is frozen and my later pension is limited to 2pc. It’s difficult for me to tell the difference between PPF and the current situation.
I suppose my query is – is this legal? I know it feels unfair, but when did fairness have anything to do with justice?
Anon
Hi,
It sounds as though your career history has given you a taste of pensions in many forms. Overall, you seem to have both benefited from some fortunate timing – as well as unfortunately missing out on occasion, too.
I’ll address your specific query on why your benefits from the House of Fraser scheme do not appear to have changed since the scheme, which has around 10,000 members, came out of the PPF, when it was acquired by the Pension Insurance Corporation (PIC).
I understand why the freezing of a large proportion of your House of Fraser pension, with the rest only rising by 2pc, might smart somewhat at a time of high inflation. Particularly as you worked there for 26 years and a large amount of your retirement income is now derived from these lower-than-expected capped pension benefits.
In normal economic times, a 2pc annual increase sounds kind of okay. Maybe not right now.
Generally speaking, a buyout from the PPF is a good outcome, providing more security for members. At the time of the deal in 2022, the chairman of PIC said the deal would mean “members will receive higher benefits than they would have under the PPF. The buyout will also provide thousands of members with certainty and long-term security for their benefits”.
According to reports at the time, the terms negotiated were designed so that members whose pensions were reduced as a result of the insolvency could expect to get an uplift to their pension. But in your case, and perhaps others, that doesn’t seem to have translated into the unfreezing of the pre-1997 element or an increase to the annual rise on the post-1997 element.
This is less than what you and presumably others may have hoped for when you heard a rescue package with higher benefits was on its way. The outcome could have been worse – but that’s not the point. You had an expectation, and from what I can see from details of the deal at the time, reasonably so.
The next course of action for you might be to dig out the paperwork and write to PIC, asking for details of your benefits and how they have improved since the buyout.
If it turns out they haven’t improved for you, and you believe you had grounds to expect them to, you may then wish to pursue it further. Depending on the reply, you might then be able to take the query to the Pension Ombudsman Service: https://www.pensions-ombudsman.org.uk
