The compensation payable to defined benefit pension scheme members, whose employers have gone bust, will be capped at £31,936.32 for people aged 65, the Pension Protection Fund has announced.

 This figure, which came into effect from the 1st April represents a 3.5% increase from 2008/09. The compensation cap for those scheme members who have taken early retirement also increases by the same percentage.

Under PPF rules, those people who are already retired and had reached their scheme’s normal pension age when their employer went bust receive 100% of what they are entitled to. But, because those who have yet to retire will receive 90% of what they were entitled to, their compensation will also be capped at the 90% level, i.e. £28,742.68.

The average payout to people whose schemes have transferred into the PPF is £4,000 a year.

At the end of March the 100th scheme to transfer into the PPF was announced. Just over 340 members of the Bristol-based Brooks Service Group Plc pension scheme, will now receive PPF compensation, or will do so on retirement.

PPF Chief Executive, Partha Dasgupta, commented:

“Losing your job can be devastating – but the situation can be made much worse if you stand to lose your pension as well. The announcement that 100 schemes have now transferred to the PPF demonstrates clearly that we are doing what we were set up to do: protecting people’s pensions when their employers go bust.

“This is a major achievement for an organisation set up just four years ago – and will help reassure people belonging to work-based pension schemes that their pensions are protected should their employer go bust. This is especially important during a time of recession.”

However, another 290 schemes covering nearly 179,000 people are currently going through the PPF assessment process.