In a consultation published on Monday, the DWP is proposing to raise the levy that funds the Fraud Compensation Fund, managed by the Pension Protection Fund, from the current charge of 75p to £1.80 per member for pension schemes, and from 30p to 65p for master trusts.

The FCF, set up in 2004, was designed to compensate pension schemes that suffered losses as a result of dishonesty. 

However, since its inception, doubts about the eligibility of claimants have caused significant delays to its operations in regards to pension scams. In its entire 16-year history, the FCF has so far compensated only 10 schemes to a value of around £5m.

We think the government needs to review the Fraud Compensation Fund and the levy underpinning it as a matter of urgency

Darren Philp, Smart Pension

The principal difficulty concerned scam schemes — vehicles set up specifically for the purposes of fraud — which may not have had a traditional link to an employer.

That issue was settled in November 2020 after the PPF and Dalriada sought clarity from the High Court, which ruled that any occupational scheme liable to pay the FCF levy could qualify for compensation in the event of fraud.

Following the court ruling, nine claims totalling £40m were received, with more expected following confirmation of eligibility criteria.

The PPF is “aware of” an additional 117 possible claims with a potential value in excess of £358m, but the FCF itself only has assets totalling…

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