Pension Protection Fund – 14 Important Points For Pensioners

1. Pension Protection Fund (PPF)

The Pension Protection Fund (PPF) was established under the Pensions Act 2004 on 6th April 2005 to pay compensation to employees (either retired or to retire) who lost their benefits when their employers became insolvent. The PPF usually steps in when the employer does not have sufficient assets to cover the Pension Schemes under which their employees were protected. To keep the PPF well-funded in case it has to act on a company’s insolvency, it levies annual charges on all eligible schemes. PPF is a public corporation under the Department for Work and Pensions.

Pension Protection Fund

2. Auto Enrolment

Auto Enrolment is a legal requirement in which the business has to provide Pension Scheme to eligible employees. If the employer than opts for PPF by paying Levy, then it becomes an eligible member of PPF so that in case of insolvency its pension members get relief. All businesses (small businesses or larger limited companies) also need to register themselves in the companies house registration.

3. Eligibility for PPF

There are certain eligibility criteria’s for PPF before it can take responsibility for a pension scheme-

  • The pension scheme has to be eligible for Pension Protection Fund and it must not have started or finished before 6th April 2005.
  • The company has become insolvent and there are no chances of rescuing or administrating it.
  • The scheme has insufficient assets to provide pension to the existing pensioners at the rate which PPF would provide once it takes control.

The PPF covers almost all occupational and hybrid pension schemes. However, there are certain schemes which will be exempt from Pension Protection Fund like schemes which have been guaranteed by a minister of the Crown, having members less than two and schemes under tax rules. There are certain other exemptions under PPF which needs to be carefully considered. When you become bankrupt, there are many steps that need to be followed before PPF can take over your pension schemes as is given in detail.

4. Pension Protection Fund Compensation Cap

The PPF compensation cap is used to determine the level of compensation payable to certain individuals. The factors taken under consideration on which the compensation applies has been defined in Paragraph 26 of Schedule 7 of the Pensions Act 2004. The compensation rolled out by PPF varies from person to person and depends on the person’s last birthday. However, there are 5 major situations where Pension Protection Fund Compensation is provided -

  1. PPF Payment if Member has retired- Full amount (100%) will be received by the person who has already retired or had to retire early due to medical conditions. The pension amount is also subject to increase in accordance with inflation.

  2. PPF Payment if Member retired early – You will generally receive 90% of the previous compensation in case your employer went bust and you did not reach scheme’s normal pension age. The cap at age 60 is, from 1 April 2017, £32,769.97 which then will become £29,492.1 when the 90 per cent level is applied per year.

  3. PPF Payment if Member yet to retire - Members who are yet to retire will be provided with 90% of the compensation which will also depend on the compensation cap. For the year from 1 April 2017, for employers at the age of 60 will receive £32,769.97 at maximum. For the complete detailed list on Compensation Cap one must check their official website.

  4. PPF Payment if Member dies - In case of death of the member full compensation is paid to legal spouse, civil or other relevant partner and children under 18 years of age (under 23 if having disability or in full time education)

  5. PPF Payment in case of Divorce - In case of divorce, compensation can be shared with former civil partner or ex-spouse provided on the courts order on pension compensation.

5. PPF Compensation Cap Amendments-

This amendment outlines the intervention that is required to protect pensioners. It also discusses in-depth policy objectives, intended effects, policy options that have been considered, alternatives to the regulation, summary of analysis and evidence, background, funding and compensation. For further details you can download the form.


The compensation paid to the members is always subject to change which depends upon the asset/fund availability of the PPF. In case there is some shortage of funds, the benefit can be reduced (the compensation are set up in government’s legislation, hence changing them is not easy and requires an Act of Parliament). Moreover, the compensation is not always 100% and it also does not take the inflation much into consideration. But it at least saves the pensioners from going complete bust.

6. Pension Protection Fund (PPF) Levy

Pension Protection Fund Levy

The Pension Protection Fund Levy is one of the possible way through which the compensation payable to the employees/members is funded by the PPF who transfer their schemes to PPF. It is basically divided into two parts –

  • Scheme-Based Levy (SBL) – It is based on schemes liabilities to its members and should be less than 20 per cent of the total amount collected.

  • Risk-Based Levy – It is based on the Insolvency Risk (IR) of the employer being sponsored and the amount of compensation that might be payable. It makes up the remaining 80 per cent of the total intended collection.

The Insolvency Risk are the chances or probability of an employer’s company becoming insolvent. This IR is based on the type and nature of the employer and includes factors like credit rating of employer, S&P Credit Model (if the business is in financial service).

7. PPF Levy – Who has to pay?

Pension Protection Levy is paid by all the eligible defined benefit schemes as defined in section 126 of the Pensions Act 2004 and the Pension Protection Fund (Entry Rules) Regulations 2005. The exceptions are schemes which are in assessment or when they have stopped becoming eligible for PPF.

8. PPF Levy 2018/19

The PPF Levy 2018/19 calculations are based on most recent s 179 valuation information, block transfers certified, Asset Backed Contribution (ABC) certificates submitted and confirmation of legal advice on scheme structure. For further information on 2018/19 Levy Determination, one should check the official website which encompasses all the details. For the year 2018/19, the levy has been estimated at £550 Million which is approximately 10% lower than 2017/18 which was estimates at £615 Million.

In a recent statement made by David Taylor, PPF executive director and general counsel “This policy statement confirms our plans for the levy in 2018/19, the first year of the third levy triennium. The levy we receive continues to play a vital role in our funding strategy. Despite significant risks, we're on track to meet our long-term funding target which means we can set the levy at this level.Over the last two years we've worked with stakeholders to ensure the levy rules remain fit for purpose for the next three years. I'm grateful for all the feedback we've received. In particular we've taken the opportunity to review and update the PPF-Specific insolvency model, building on our experience of using it. We are also confirming today that we will use credit ratings where they are available, or a specific credit model for financial institutions, to assess insolvency risk.”

9. PPF Assessment Period

The assessment period is used to ensure that all the details, documents and necessary paperwork are included and correctly entertained before PPF takes over. There are 5 important stages in the assessment period-

  1. Notification By Insolvency Practitioner – Section 120 notice has to be received by the PPF once the company falls into compulsory liquidation. This notice has to be send by the insolvency practitioner of the company.

  2. Validating the Section 120 Notice – In this period, PPF works with the trustees of the pension scheme and gets all the necessary information, documents and paperwork done in order. Once PPF gets all the documents, a 28 day period starts where PPF gets to decide whether the scheme is eligible or not. If scheme is eligible then Assessment period will start. The start of Assessment period also marks the date of the insolvency event.

  3. Assessment Period – It is the lengthiest process where PPF checks the correctness of all the documents being submitted by the trustees like trust registration service by trustees. The trustee’s responsibility is to ensure that all the members of the pension scheme are aware about the recent events. The trustees are also responsible for continuing payment during this period. Finally an actuary will validate Section 143 which is to confirm whether then pension payments will be made, and if made then at what rates.

  4. Transition Period– This process takes almost 6 months where the PPF requests for section 143 valuation and till the time where the trustees hand overs the responsibility to PPF. It involves multiple functions like reviewing documents, agreement of the shareholders, checking legal options, paper of resignation of directors if carried out terminating any previous contracts with advisors, if necessary and most importantly transferring assets available under the scheme.

  5. Commencement of PPF Scheme – Once all activities have been completed and final valuation of the scheme is done where it has been proved that the scheme does not have sufficient assets, PPF will start taking responsibility of the pension members.

10. Become Member of Pension Protection Fund

Pension Protection Fund Member

To become a member of PPF one has to login to the website and register themselves and create a new account. Below are the steps given for registering-

  1. Click on register button and proceed after reading the T&C and Privacy Policy carefully.
  2. Enter your details like Name, Contact Number, Email Address and National Insurance Number.
  3. One Time Code will be sent to your mobile number through sms or there will be a voice text in case the number provided is for landline.
  4. Create your username and password to login.

11. List of Schemes under Pension Protection Fund

There are around 1000 schemes which are protected under the Pension Protection Fund. Employees who were receiving pension under the mentioned schemes will start receiving pension under PPF.

  1. The Coverdale Organisation Plc Pension And Assurance Scheme - The Coverdale Organisation Limited
  2. Leatherhead International Pension Scheme - LFI1 Limited
  3. Ocean Staff Pension Scheme - Ocean Integrated Services Limited
  4. Industry Wide Mineworkers Pension Scheme - UK Coal Kellingley Limited Section - UK Coal Kellingley Limited
  5. Industry Wide Mineworkers Pension Scheme - UK Coal Kellingley Limited Section - UK Coal Kellingley Limited
  6. Industry Wide Coal Staff Superannuation Scheme - UK Coal Production Limited Section - UK Coal Production Limited
  7. Delage Timber Limited Pension And Life Assurance Scheme - Delage Timber Ltd
  8. Pelloby Engineering Limited Pension Scheme - Pelloby Engineering Ltd
  9. John Sutcliffe And Son (Holdings) Limited Staff Pension And Assurance Scheme - Grimsby & Immingham Stevedores Limited
  10. Lionverge Section - Lionverge Civils Limited
  11. John Sutcliffe And Son (Holdings) Limited Staff Pension And Assurance Scheme - John Sutcliffe & Son (Holdings) Limited
  12. Kiveton Park (Holdings) Pension Fund Kiveton Park (Holdings) Limited - Kiveton Park (Holdings) Limited
  13. Kiveton Park (Holdings) Pension Fund - Kiveton Park Steel Limited
  14. Kiveton Park (Holdings) Pension Fund - Kiveton Park (Supasplit) Limited
  15. Kiveton Park (Holdings) Pension Fund - Barmond International Limited
  16. Brantano UK Pension Scheme - BUK (Realisations) Limited
  17. Tachodisc Pension Fund - Tachodisc Limited
  18. Robins Davies & Little Group Pension And Life Assurance Scheme - Stonehouse South Limited
  19. The McArthur Group Limited Retirement Benefits Scheme - McArthur Group Ltd
  20. The McArthur Group Limited Retirement Benefits Scheme - McArthur Cyclone Limited

You can download the complete List of Schemes under Pension Protection Fund here.


12. Pension Protection Fund Compensation Calculator

Before calculating you would require some details like –current salary, number of years served, pension accrual rate, retirement age and annual inflation rate (the maximum you can put as per latest details is 2.5%, even if the actual inflation rate is higher). Note that the amount given in the results are only an indication and it would be wise to consult an accountant for understanding the full process and amount.

You can visit this site for more in-depth understanding

13. Pension Protection Contact Details

Pension Protection Fund Address- The Pension Protection Fund, Renaissance, 12Dingwall Rd, Croydon CR0 2NA, UK

Pension Protection Fund Telephone Number (Domestic) - 0330 123 2222, 0345 600 2541, 020 7566 9775, 0345 600 2541

Pension Protection Fund Telephone Number (International) - +44 (0)20 8633 4902, +44 (0)20 8633 4900, +44 (0)20 7566 9775

Pension Protection Fund Email Address-,,,

14. Pension Protection Fund - Carillion

The recent collapse of construction industry giants Carillion has not put only jobs at risk but also the pensioner’s money in doubtful considerations. However, the Pension Protection Fund covered the pensioners from Carillions liquidation. Carillion’s pension deficit of £587 million for which it has around 27,000 employees will mostly be absorbed by Pension Protection Fund (PPF) depending on the type of pension scheme they have. Currently as per some experts, PPF is pretty stable to absorb the deficit. As of March 2017, the PPF had £28.7bn in invested assets, and cash reserves of £6.1bn.

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