At the start of this month, the Government launched a consultation that proposes increasing the Fraud Compensation Levy (FCL) to 65p per master trust member and £1.80 per other scheme member. This follows the April announcement from the Pension Protection Fund (PPF) that the 2021/22 levy would triple to 75p per member of every occupational pension scheme (with authorised master trusts being charged 30p per member).

The additional money is needed by the PPF to allow it to repay the loan agreed by Parliament last month under the Compensation (London Capital & Finance plc and Fraud Compensation Fund) Act 2021. The loan facility was granted as a direct result of the High Court case of PPF v Dalriada Trustees last November concerning a test case that involved fraudulent occupational pension schemes designed for “pension liberation”. The PPF’s annual accounts for the year ending 31 March 2021 suggest that the Fraud Compensation Fund (FCF) is now vulnerable to claims of over £400m from these sorts of frauds – way in excess of the £33.9m in the FCF at this point. The DWP says the loan is expected to cover claims relating to 122 schemes and amount to approximately £250m over the period 2021 to 2025. It would like to see its loan paid off by 2030/31.

As noted in the consultation document, commentators have previously suggested a wholesale review of the FCL – exempting schemes that maintain robust governance systems from payment and changing the calculation basis so…

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