Frequently asked questions

Answers to frequently asked questions about who we are, how we're funded and what we do.

Who are we?

The PPF was set up in April 2005 as a statutory public corporation to provide people with a UK defined benefit (DB) pension with financial security if their employer fails. A DB pension scheme will only transfer into us once we’ve assessed that it can’t afford to buy benefits for its members from an insurance company which are equal to, or more than, what we pay.

Who do we protect?

We protect close to 10 million people in the UK with DB pension schemes. We’ve protected our members’ futures for more than 15 years, and we’ve grown into an organisation with more than £39 billion assets on behalf of around 295,000 members. At present, we provide PPF benefits to more than 185,000 people and hundreds of thousands more will come into payment in the future. We also look after 145,000 people from the Government’s Financial Assistance Scheme (FAS). 

Are we government or tax payer funded?

Despite being a public body set up by the Pensions Act 2004, we’re not funded by the government or the tax payer. We’re run by an independent Board which is responsible to Parliament through the Secretary of State for the Department for Work and Pensions.

How are we funded?

The cost of running the PPF and the benefits we pay our members are paid for through an annual levy charged to all the eligible pension schemes we protect, income from our investments, the assets of schemes that transfer into us and recoveries, including money and other assets, from the insolvent employers of the schemes we take on. 

What is our investment strategy?

We're one of the UK’s largest asset owners with more than £39 billion of assets under management. We invest our assets using a long-term, low-risk investment strategy and our investment performance remains strong despite market volatility. We have £11.7 billion in reserves which is the amount we hold above what we estimate we need to pay every current member and their dependents their PPF benefits for life.

What is our funding strategy?

We remain robust and our funding strategy ensures we are well equipped to face future challenges. To understand the risks we face, we use a long-term risk model (LTRM) which models around a million different scenarios so we can project what the future might look like. Our LTRM considers existing assets and liabilities and how they might develop over time, possible claims from eligible pension schemes and the assets and liabilities these claims might bring, and possible levy income. The LTRM measures progress against our funding objective.

What happens in our assessment period?

We don't take the responsibility for a DB scheme as soon as an employer goes insolvent. The scheme and its members first enter an assessment period which usually lasts between 18 to 24 months. During this time, we carry out a series of tasks and activities to check that all the scheme data, including members’ details, is accurate so that members can receive the right benefits. Scheme trustees remain responsible for the day-to-day running of the scheme whilst it is in assessment including paying pensioners their benefits.

What is our role during restructuring and insolvency negotiations?

Once a sponsoring employer has suffered and insolvency event, its DB pension scheme will enter our assessment period. Whilst in assessment, we play a statutory role exercising the scheme’s creditor rights in restructuring and insolvency negotiations. During these negotiations, we aim to secure the best outcome for the scheme to improve its funding position and to reduce its risk on us. If, through these negotiations, we secure sufficient funding to allow the scheme to pay its members a pension above what we pay, the scheme will buy-out benefits with an insurer and will not transfer into us. If there are insufficient funds to allow this to happen, the scheme will transfer into us and its members will become members of the PPF. 

If a sponsoring employer submits a restructuring proposal for consideration, it must satisfy our strict published principles for it to be successful. These seven principles essentially require that employer insolvency is inevitable and that the proposal provides a significantly better return for the pension scheme than it would receive through the normal insolvency process.

What level of compensation do we provide?

If members are over the normal pension age of the scheme, or are in receipt of a spouses, dependants or ill health pension they will receive 100 per cent of the pension in payment when the company entered insolvency. If a member is an early retiree or under the normal pension age of the scheme, they will receive 90 per cent of what they were promised.

Is the amount of compensation capped?

Following a court ruling in July 2021, the statutory limit on the amount of compensation we pay, known as the compensation cap, no longer applies. Read more about the court ruling, or find out more about the compensation cap factors that applied before the ruling.

What would happen to members if the PPF didn’t exist?

Without us, people who had built up their pension benefits over their entire working lives would have been left with nothing. Our compensation is almost always substantially more than members would have received if they simply received a share of what was left in their scheme when their company became insolvent.