The compensation payable to defined benefit pension scheme members, whose employers have gone bust, will be capped at £31,936.32 for people aged 65, the Pension Protection Fund announced.
This figure, which comes into effect from 1 April 2009 and represents a 3.5 per cent increase from 2008/09, was ratified in an order laid before Parliament.
The compensation cap for those scheme members who have taken early retirement also increases by the same percentage.
Under PPF rules, those people who are already retired when their employer went bust receive 100 per cent of what they are entitled to.
But, because those who have yet to retire will receive 90 per cent of what they were entitled to, their compensation will also be capped at the 90 per cent level, ie £28,742.68.
The average payout to people whose schemes have transferred into the PPF is £4,000 a year.