On the go: A bill has been introduced to parliament that will enable the Pension Protection Fund to receive a loan from the Department for Work and Pensions in order to make fraud compensation payments.
The compensation bill includes an amendment to the Pensions Act 2004, which will allow the government to loan money to the PPF for the purposes of the Fraud Compensation Fund.
The pensions lifeboat now has a number of claims in the FCF with a total value of more than £40m, and it is expecting to receive more since scam schemes are now eligible to apply for compensation.
The Fraud Compensation Fund, set up in 2004, was designed to compensate pension schemes that suffered losses as a result of dishonesty.
However, since its inception, doubts about the eligibility of claimants have caused significant delays to its operations in regards to pension scams. The FCF did not pay out a single claim in 2019, despite the PPF collecting a fraud compensation levy amounting to £4.8m that year.
In its entire 16-year history, the FCF has so far compensated only 10 schemes to a value of around £5m.
The principal difficulty concerned scam schemes, vehicles set up specifically for the purposes of fraud that may not have had a traditional link to an employer.
That issue was settled in November last year after the PPF and Dalriada sought clarity from the High Court, which ruled that any occupational scheme liable to pay the FCF levy could qualify for compensation in the event of fraud.
As Pensions Expert reported in April, the PPF will be raising the fraud compensation levy to the maximum allowed by law as the number of claims rises. The pensions lifeboat stated, at the time, that schemes will have to pay a levy of 75p per member (30p for master trusts) for the FCF in 2021-22.
