Pensions and insolvency—beginners’ guide
Produced in partnership with Wyn Derbyshire of gunnercooke LLP
Pensions and insolvency—beginners’ guide

The following Pensions guidance note Produced in partnership with Wyn Derbyshire of gunnercooke LLP provides comprehensive and up to date legal information covering:

  • Pensions and insolvency—beginners’ guide
  • Pension Protection Fund (PPF)
  • Financial Assistance Scheme (FAS)
  • Pre-packs
  • Pensions and personal bankruptcy

This guide is primarily aimed at trainees, newly qualified lawyers and other persons who are new to or unfamiliar with pensions law.

This beginners’ guide considers issues of pensions law and practice that can arise in the event of the insolvency (or prospective insolvency) of employers sponsoring defined benefit (DB) and hybrid occupational pension schemes.

Pension Protection Fund (PPF)

The PPF is designed to provide support for members of (eligible) underfunded DB pension schemes where sponsoring employers suffer qualifying insolvency events.

The legislative framework for the PPF can be found primarily in:

  1. sections 107–220 of the Pensions Act 2004 (PeA 2004) and PeA 2004, Sch 7

  2. the Pension Protection Fund (Entry Rules) Regulations 2005 (the Entry Regulations), SI 2005/590, and

  3. the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (the Modification Regulations), SI 2005/441

Eligibility and entry

The requirements for a scheme to enter the PFF are as follows:

  1. the scheme must be an eligible scheme

  2. a ‘qualifying insolvency event’ (see below) must occur in relation to a scheme employer

  3. the insolvency practitioner acting in relation to the employer must confirm that a scheme rescue is not possible, and

  4. the value of the assets of the scheme must be less than the ‘protected liabilities of the scheme’ (broadly the benefits that would be payable to members by the PPF)

Eligible schemes include:

  1. DB