Defined Benefit  

Pensions lifeboat expects thousands more to need rescue

Pensions lifeboat expects thousands more to need rescue

The Pension Protection Fund (PPF), the lifeboat for defined benefit schemes, has revealed in its strategic plan that it expects its member numbers from collapsed firms to grow from 225,000 to 300,000 by 2020.

This could include members from the British Steel Pension Scheme (BSPS), who are currently subject to an in-principle deal which could pave the way for a new scheme to be set up. Members would be given the choice between this scheme and the PPF - if they choose the latter it would significantly increase the current size of the PPF in terms of members and assets under management.

The lifeboat fund's Strategic Plan 2017-2020, published on 15 June, also referred to the PPF's responsibility for the Fraud Compensation Fund, which protects members of schemes who have suffered loss to their pensions as a result of dishonesty.

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Because it has been notified of potential future claims, the PPF has taken the decision to raise a levy in 2017/18 set at 25p per member of a defined benefit pension scheme - the first time it has applied one in five years. It is expected that this will raise £5m.

The plan also sets out the PPF’s financial projections for the next three years, including taking responsibility for an estimated £32bn in assets under management by 2020.

It also confirmed that the organisation has successfully completed the first two phases of its project to insource part of its investment management, and plans to insource sections of its private and public market credit portfolio over the next three years. The PPF will also examine the rationale for insourcing passive currency hedging.

Arnold Wagner, chairman, PPF said: “The PPF protects 11 million members of defined benefit schemes. The pensions world before we were established, where members might be left with nothing, is now unthinkable. A culture of continual improvement has helped us to evolve into a sophisticated, well-run organisation which strives to provide value for money for levy payers and valuable protection for members.”

Alan Rubenstein, chief executive, PPF said: “Our operating environment contains many uncertainties. We have a good understanding of our risks and mitigate them where they are within our control.

"However, the future performance of the UK and global economies, and the volatile funding levels among the schemes we protect, pose particular risks. Nevertheless, we are confident that our funding strategy puts us in a good position to face the future.”

The strategic plan was prepared for publication in April but this was delayed as a result of purdah rules for public bodies in the run-up to the general election.