The UK’s Pension Protection Fund (PPF) has begun work on implementing an EU court judgement that will increase benefits for people affected by its annual benefit cap.

Last month the Court of Justice of the European Union ruled that the PPF – which compensates members of defined benefit schemes when their company goes bankrupt – must pay its members at least half of their original benefits.

The PPF’s rules impose an annual cap on payments – currently £39,000 (€44,500) for a 65-year-old – which in a small number of cases meant members received less than 50% compensation.

The lifeboat scheme said it had begun writing to members expected to be affected by the ruling, but admitted it did not know what the overall cost impact would be.

Last month the PPF said the ruling was likely to increase its liabilities by 1% at most. At the end of March it had a surplus of more than £6bn.

In a statement yesterday the compensation fund said it had begun writing to members to confirm its data, but had also put in place an “interim process” in an attempt to address shortfalls in compensation as soon as possible.

“Where we find the PPF compensation is less than 50%, we will increase the headline level of our compensation payments until the total value is at least equal to 50% of their expected pension,” the fund said.

“Existing PPF indexation and revaluation rules will apply to this increased headline amount. We anticipate that this will be a one-off change needing no further adjustment.”