Pension Protection Fund

In previous issues:-

Taxation of Trusts and the 2006 Budget Civil Partnerships Why do Life Insurers ask so many Questions? Writing a will 6 April 2006  Will See a Revolution in Pensions The Private Residence & Inheritance Tax Traded Endowment Policies

There has been substantial coverage in the press recently relating to a new initiative known as the Pension Protection Fund (PPF). The scheme is designed to compensate members of final salary (defined benefit) schemes who may lose out if their employer becomes insolvent.

The PPF is essentially a form of insurance plan, which most final salary pension schemes must belong to. The pension scheme can then turn to the PPF for assistance if it does not have enough money to pay its members' pensions.

The pension schemes themselves will contribute to the PPF by paying fees for each of their members, and consequently building a fund.

Should a pension scheme require assistance from the PPF, then members currently drawing their pension benefits will receive 100% of their original entitlement. Members who are yet to begin drawing their pension benefits will receive a maximum of 90% of their original entitlement.

Although the figures quoted appear to be generous, there are a number of other factors and limitations which need to be taken into account when calculating the level of protection offered to an individual. It has recently been illustrated that some members yet to draw their benefits, may receive as little as 32% of their original entitlement (source; O&M Financial Services Ltd).

If you have left the employment of a company, but still have retained pension benefits in that company’s pension scheme that you they have yet to draw on, and have doubts about the stability of your ex-employer or the pension fund, why not contact us and arrange for a review to be carried out.  We act as introducers to a specialist firm who will analyse your entitlement and give you a detailed report as to your options.

When a scheme is taken on by the PPF, the ability to transfer your benefits is lost. This will result in you being limited to the compensation available under the PPF scheme.

Obviously there is no way we can predict which schemes will need to rely on the PPF, but at least you will be in a position to make a more informed decision - if you act now!