Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what components are included in the Government's estimate of around £2 billion for the cost of Financial Assistance Scheme pre-1997 indexation; and whether that figure includes (a) arrears, (b) indexation at a CPI cap above 2.5%, and (c) post-1997 assistance costs.

The Government has brought forward legislation to introduce increases on compensation payments from the Pension Protection Fund and Financial Assistance Scheme that relate to pensions built up before 6 April 1997. These will be CPI-linked (capped at 2.5%) and apply prospectively (i.e. to payments going forward) for members whose former schemes provided for these increases.

At the Budget, the cost of this measure was estimated to be around £0.3 - £0.6 billion for the Financial Assistance Scheme over the lifetime of the scheme.

The Pension Protection Fund has previously estimated that the cost of providing both prospective and retrospective pre-1997 indexation in the Financial Assistance Scheme is around £2 billion for members whose former schemes had provided such indexation. This estimate is broken down as follows:

a) It includes arrears for retrospective pre-1997 pension increases of CPI capped at 5%: £0.5 billion.

b) It includes prospective and retrospective pre-1997 pension increases of CPI capped at 5%: £1.3 - £2.0 billion.

c) The estimate of £2 billion does not include post-1997 assistance costs.