Pension Protection Fund – FAQ – 10 Points to Know
Pension Protection Fund – FAQ’s
1. Can you transfer out of Pension Protection Fund?
Ans. If your scheme is in assessment period and has not entered into PPF, then opting out of PPF is possible. However, once the assessment period is over and Pension Protection Fund has assumed responsibility, you cannot transfer out of PPF (of course unless before the start of the assessment period pensionable service was ended).
2. Is my pension protected under PPF?
Ans. Yes, your pension is protected under PPF. However the amount you get will depend on certain factors like when you have retired (before or after your employer went into liquidation) and compensation cap as specified by PPF. You can learn more about compensation cap here.
3. Who funds the PPF?
Ans. The PPF is majorly funded by the member eligible pension schemes. They have to pay an annually Pension Protection Levy. Apart from that they also do get returns on their investments and the assets that get transferred to their schemes.
4. What is Pension Protection Fund Compensation?
Ans. PPF Compensation is the compensation paid to employees if their employers company goes into compulsory liquidation and PPF assumes responsibility over the pension schemes. The compensation paid depends on various factors like retirement age and compensation cap.
5. What is Pension Protection Fund?
Ans. The Pension Protection Fund (PPF) is a fund created under the Pensions Act 2004 to protect pensioners from losing their entire pension amount if their employer goes into compulsory liquidation. It has also resumed responsibility of Fraud Compensation fund, which provides relief to pensioners who lost their benefits due to fraud.
6. What is the PPF levy?
Ans. PPF Levy is the main method through which the PPF gets funded – it charges an annual levy on member eligible schemes. There are two schemes – Scheme Based Levy and Risk Based Levy.
7. Is there a cap on PPF compensation?
Ans. Yes there are caps on PPF compensation. The caps are defined on many levels like age, retirement and current situation of PPF. The cap for a 60 year old is currently £38,505 a year, and then 90 per cent is applied to give an annual payment of £34,655. Payments will be increased each year depending on the inflation rate.
8. Is the pension protection fund a government body?
Ans. PPF is not a government body in strict sense, however it is a statutory fund created under Pensions Act 2004. However, changing the levels of compensations requires an Act of Parliament since they are written in the legislation.
9. What is the eligibility for claiming relief from PPF?
Ans. Only when the pension scheme is registered under PPF and has gone into liquidation and also does not have assets to cover pension scheme, relief will be provided from PPF after the assessment scheme.