A defined benefit pension scheme which was mistakenly treated as a defined contribution scheme has fallen into the Pension Protection Fund following a ruling by The Pension Regulator.
In 2010, the trustees of the DCT Civil Engineering Staff Pension Fund changed the deed of the scheme so that benefits were calculated as if the scheme were DC.
When the scheme's sponsoring employer DCT Civil Engineering went into administration in 2014, it was not clear whether the the scheme was eligible to go into the PPF, as the PPF is a lifeboat fund solely for DB schemes.
In its investigation, TPR found the scheme actuary had informed the trustees that accrued defined benefits could not be changed from DB to DC without member consent.
However, the regulator concluded "it was not the trustees’ intention to change the scheme rules from DB to DC, and the apparent change to the member benefits was simply a mistake".
TPR therefore used its powers to declare the 2010 change to the deed void, allowing the scheme's 11 members to receive benefits from the PPF.
Nicola Parish, TRP's executive director for frontline regulation, said: “This case shows that we will use our powers to protect schemes in appropriate cases, regardless of the number of members. The modification of the scheme rules had a serious impact on reducing members’ accrued benefits, and so we considered it appropriate to act to protect them.
“By using our power to declare changes to the scheme rules void, we’ve enabled members to benefit from PPF protection, which will be higher than they would have received if the amended DC scheme rules had been allowed to stand.”
The PPF pays members 90 per cent of the benefits they would have received had the scheme survived.
james.fernyhough@ft.com
