The Department for Work and Pensions (DWP) has stated that there is “no legal basis to pay interest" on arrears due to Financial Assistance Scheme (FAS) members, in response to queries over the differing approach for FAS and Pension Protection Fund (PPF) members.

Work and Pensions Committee chair, Stephen Timms, recently wrote to Pensions Minister, Guy Opperman, to request further information on DWP's approach to paying arrears for members of the PPF and FAS following a recent Court of Appeal ruling.

This judgment found that PPF’s use of the ‘Hampshire uplift’ was lawful, although it ruled that the cap on compensation paid out by the PPF was unlawful on the grounds of age discrimination.

Whilst the PPF has been uplifting the compensation payments of both PPF and FAS members affected by the Hampshire judgment, it delayed making any payment of arrears until its methodology for calculating the uplifts had been settled by the courts.

Following the court judgments, the PPF has therefore started to pay arrears of compensation payments and financial assistance to affected members, with members to receive uncapped arrears with interest paid and no time limit.

However, in his letter to the DWP, Timms queries why FAS members "will similarly receive arrears with no time limit, but no interest will be paid and a cap, not dissimilar to the one ruled unlawful for PPF members, remains in place".

Opperman's letter, however, explained that whilst the Court of Appeal ruling means that the PPF compensation cap has to be disapplied, and affected members are entitled to arrears of uncapped compensation payments, the FAS cap was not subject of legal action.

“The cap on financial assistance payments applies to all members and there is no differentiation on the grounds of age," he explained.

“The board of the PPF decided to back date the payment of arrears arising from the Hampshire judgment and the disapplication of the PPF cap to the inception of the PPF.

"Regulation 17 of the Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 requires the PPF to award interest on underpaid compensation.

“The Secretary of State, who is responsible for the taxpayer funded FAS and mindful of her duty to protect public funds, similarly decided to fully backdate the payment of arrears arising from the Hampshire Judgment.

"Unlike the PPF, there is no legal basis to pay interest on the arrears due to FAS members and so no interest is payable.”

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