PPF Assessment: What You Need To Know

Overseeing the wind up of a pension scheme is a complicated and delicate process. Trust-based pensions could have a large number of beneficiaries who will be anxious and uncertain about the termination and understandably concerned about their financial future. Trustees managing a wind up need to be able to inform and advise beneficiaries on every aspect of the process – and be aware of the options available to the scheme in terms of compensation.

Compensation for failed pension schemes is available in the form of government funds designed to ensure members do not lose out on years of working contributions. The Pension Protection Fund (PPF) along with its counterpart, the Financial Assistance Scheme (FAS), was set up in 2005 ┬áto deal with insolvent schemes: insolvent pensions transferring to the PPF should be able to protect members’ pension payments and deliver most or all of a beneficiary’s pension.

Compensation: Assessment and Acceptance

In the current economic climate of uncertainty and upheaval, a significant number of pension schemes unfortunately face insolvency – increasing the pressure on the PPF and its ability to carry out its mandate. To ensure compensation reaches those schemes which need it, the PPF involves a strict assessment process which all eligible applicant schemes must pass through before they can transfer.

PPF assessment should take a maximum of two years but, to ensure a swift and relatively unproblematic application, trustees should be familiar with the administrative requirements of the process, including working with the PPF to determine eligibility. The assessment is designed to completely check and verify a failing scheme’s needs – including calculations of how much will be paid to members after the transfer and the potential for that scheme to go without PPF assistance. Once a scheme is verified to be in need of PPF assistance, transfer to the fund may go forward.


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Trustees: The Value of a Professional

Since trustees are expected to handle the PPF assessment process, applications may be expedited by appointing personnel with specific skills relating to a given pension scheme’s situation. While lay-trustees may be equipped and able to carry out the tasks associated with the day-to-day management of a pension trust, the extra pressure and administrative complications of PPF transfer bring extra burdens. Acquiring the services of professional trustees, with specific PPF assessment expertise, can be a huge advantage to a swift and efficient assessment.

Many trustees organizations specialize in PFF assessment, with a roster of employees from a range of financial, legal and actuarial backgrounds. Acquiring a professional trustee means an opportunity to tailor a service to the needs of a specific pension scheme and bring years of PPF experience to the table. Pension regulation changes constantly and it’s crucial that trustees are familiar and up to date with the financial landscape.

Navigating the PPF assessment process successfully is about more than the protection and financial security of a scheme’s beneficiaries – although that is the intended outcome. When a failing pension successfully transfers to a compensation scheme, confidence is bolstered in pensions on a much wider scale, encouraging employees to contribute to their own schemes and spread good financial practice on a national level.

For more information, see Dalriada Trustees’ PPF assessment page

Written by Hal Wightman of Pensions Clarity

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