Pensions (Special Rules for End of Life) Bill 2023-24

The Pensions (Special Rules for End of Life) Bill 2023-24, was introduced on 6 December 2023 by Conservative MP Mr Laurence Robertson as a Private Member’s Bill, presented to Parliament through the ballot procedure.

The Bill aims to extend eligibility for receiving terminal illness payments from the Pension Protection Fund and Financial Assistance Scheme. Clause 1 of the Bill would amend the definition of terminal illness used by both organisations to include people with a life expectancy of up to twelve months – instead of six months.

The Bill covers all of the UK and would come into force at dates chosen by the Secretary of State and Department for Communities in Northern Ireland. The explanatory notes for the Bill were drafted by the Department for Work and Pensions with the consent of Mr Laurence Robertson.

The Second Reading of the Bill took place on 2 February 2024 and Committee stage on 24 April 2024. It passed both stages without amendments being made or tabled.

Report stage of the Bill is due to take place on 17 May 2024.

What are the Pension Protection Fund and Financial Assistance Scheme?

Defined benefit schemes pay a promised pension which is based on factors such as salary and length of service. A sponsor, which is usually the employer, guarantees that the promised pension benefits are paid.

The Pension Protection Fund

The Pension Protection Fund (PPF) is a statutory fund to protect members of defined benefit schemes if the scheme’s sponsor becomes insolvent.

If the sponsor of a defined benefit scheme becomes insolvent the scheme is assessed by the PPF. Following an assessment, the scheme may enter the PPF. If this happens the PPF will pay a pension (compensation) to the scheme members. The pension paid by the PPF will typically be less than what the scheme would have paid outside of the PPF.

Well-funded schemes might not enter the PPF. If the assessment shows that the scheme has sufficient assets to do so, it could secure its members’ pension benefits at a higher level than offered by the PPF.

The PPF can pay a one-off lump sum to someone who is terminally ill providing they have not previously received compensation from the PPF. It cannot pay any further compensation to someone who has received a lump sum for terminal illness.

The Financial Assistance Scheme

The Financial Assistance Scheme (FAS) provides financial assistance to members of defined benefit schemes who lost all or part of their pension if their scheme came to an end between 1 January 1997 and 5 April 2005.

The FAS can start payments at any age for someone with a terminal illness. It does not pay a lump sum.

Definition of terminal illness

Both the Pension Protection Fund and Financial Assistance Scheme use the same legal definition of terminal illness. That is:

… a person is “terminally ill” at any time if at that time the person suffers from a progressive disease and the person's death in consequence of that disease can reasonably be expected within 6 months.

The Pensions Act 2008 allowed members of the PPF who are terminally ill to claim a lump sum. The then Work and Pensions Minister said that this would be “using the same rules to define “terminally ill” as those that are used in the financial assistance scheme and in [Department for Work and Pensions] benefits.”

Social Security (Special Rules for End of Life) Act 2022

The definition of terminal illness used by the Department for Work and Pensions was extended by the Social Security (Special Rules for End of Life) Act 2022. The definition was extended to include people with a life expectancy of up to twelve months – instead of six months.

The Pensions (Special Rules for End of Life) Bill 2023-24 aims make a similar change to the definition used by the Pension Protection Fund and Financial Assistance Scheme.