The Department for Work and Pensions (DWP) is consulting on draft regulations to switch from using the Retail Price Index (RPI) to the Consumer Price Index (CPI) for increasing, in line with inflation, compensation payable by the Financial Assistance Scheme (FAS) and Pension Protection Fund (PPF). The draft regulations also apply to how the FAS cap is increased annually and how the PPF carries out valuations when deciding whether to takeover responsibility for a scheme.

The changes are intended to come into force in 2011. However, primary legislation is needed to make the switch to the CPI for PPF indexation, and this is expected to come into force in January 2012.

The consultation closes on 3 November 2010.

The draft regulations only apply to the PPF and FAS. Further regulations are still expected for the proposed switch to CPI for ongoing occupational pension schemes (for background see EPB bulletin 6 August 2010 on our website).

See the DWP’s website for the draft regulations: http://www.dwp.gov.uk/