The government has made two technical changes to the Fraud Compensation Fund (FCF) and Pension Protection Fund (PPF) regulations, with the regulations for these changes having now been made and laid before both Houses of Parliament.

The government previously held a consultation on the two changes, which look to correct an anomaly whereby PPF compensation is stopped for child dependants of PPF members if they take a gap year, and to allow the FCF to make interim payments to allow schemes with insufficient assets to progress an application.

This revealed that the PPF had been notified that around 70 to 85 per cent of the schemes potentially in scope for FCF compensation have exhausted most or all their assets, with DWP warning that such schemes pose "significant challenges" for trustees in making and progressing a FCF application.

Following on from this, the government response confirmed that the proposals for an FCF amendment received broad support, although there were some concerns about the operational implementation of interim payments.

However, the DWP stated that ultimately it believes that new regulations will be effective in facilitating potentially eligible schemes to progress claims, confirming that it will proceed with the amendment, having made one minor change to their wording.

In particular, the government expanded the drafting of the FCF amendment to include expenses, allowing interim payments to be made to cover “costs, expenses and liabilities arising as a consequence of an application”.

This change aims to broaden the categories for which interim payments can be made, to take into account ongoing expenses as well as one-time cost, and brings the wording of the instrument more closely in line with the phrasing used to describe similar costs in the Dalriada judgment, in which investigating fraud is repeatedly said to incur “costs, expenses and liabilities” for a scheme.

The DWP also noted that the FCF is intended to operate with a large measure of independence, meaning that the way interim payments are implemented at an operational level will be ultimately decided upon on a case-by-case basis by the board, in managing the FCF.

"The operational effectiveness of the draft amendments in facilitating the applications of potentially eligible schemes will continue to be monitored after they are implemented, and the FCF have agreed to update the government on this as necessary," it stated.

In addition to the FCF amendment, the government confirmed plans to proceed with the changes to the PPF regulations, revealing that all of those who responded agreed that the regulations met the stated policy intent, and none identified any unintended consequences.

All parts of the regulations will come into force on 6 April 2023.

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