Pension Protection Fund

The Board of the Pension Protection Fund (PPF) is a statutory fund in the United Kingdom, intended to protect members if their pension fund becomes insolvent. It was created under the Pensions Act 2004. The Board of the PPF is a statutory corporation responsible for managing the Fund and for making payments to members.

The PPF started on 6 April 2005 in response to public concern that when employers sponsoring defined benefit pension schemes became insolvent, scheme members could lose some or all of their pension if the scheme was underfunded. Besides offering compensation to those pension scheme members affected by insolvencies the Government hoped that the existence of the PPF would improve confidence in pension schemes generally.

The Board of the PPF has also taken over responsibility for managing the Fraud Compensation Fund, which will provide compensation to members of pension schemes who lose their entitlements due to Fraud. The PPF is chaired by Arnold Wagner OBE and the previous chair between April 2010 – June 2016 was Barbara, Lady Judge,. The chief executive since April 2009 is Alan Rubenstein.

Most defined benefit schemes, as well as the defined benefit portion of hybrid pension schemes based in the United Kingdom are eligible for protection. The exceptions include schemes that are covered by a crown guarantee.

All eligible schemes are required to pay annual levies to the PPF to contribute towards administration and the compensation Fund itself.

Before a scheme can enter the PPF it has to go through a period of assessment. Entry to the assessment period is triggered by a qualifying insolvency event. During assessment a valuation is carried out of the scheme's assets and liabilities. If this valuation finds that the scheme can afford to purchase annuities for members at or above the level of compensation the PPF would provide, then the scheme leaves the PPF assessment to wind up independently. If the scheme cannot afford to purchase such benefits for its members, the assets of the scheme transfer into the Fund and the Board takes over responsibility for paying compensation to members. This process is more complex if the company is a multinational company. In October 2011, the Court of Appeal ruled that Nortel Networks £2.1 billion pension debts should be considered as "administration expenses" rather than an unsecured creditor claim. US courts are likely to regard the claim as dating from the moment of underfunding rather than the administration date and hence the regulator is thought unlikely to be able to recover assets in the US.

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