Pension Protection Fund
A statutory compensation fund, established by the Pensions Act 2004 and run by its Board, which takes over eligible defined benefit pension schemes when the sponsoring employer becomes insolvent with insufficient scheme assets, and pays compensation to members.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
The Pension Protection Fund exists to stop members of defined benefit pension schemes losing their retirement income entirely when their employer goes bust. Part 2 of the Pensions Act 2004 establishes 'The Board of the Pension Protection Fund' as the body responsible for running it, and section 161 sets out what happens once a scheme actually transfers in: 'where a transfer notice is given to the trustees or managers of an eligible scheme, the Board assumes responsibility for the scheme in accordance with this Chapter.'
The legal effect of the Board assuming responsibility is comprehensive: section 161(2) provides that 'the property, rights and liabilities of the scheme are transferred to the Board, without further assurance', that 'the trustees or managers of the scheme are discharged from their pension obligations', and that thereafter 'the Board is responsible for securing that compensation is (and has been) paid in accordance with the pension compensation provisions.' The original scheme is then treated as having been wound up immediately afterwards, with members instead receiving PPF compensation — typically at a reduced level compared with their original scheme benefits — funded by a levy on other eligible schemes.
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Official sources
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