Glossary · UK
What is Pension Protection Fund (PPF)?
A statutory lifeboat fund compensating members of defined benefit pension schemes whose employer has become insolvent.
Full Definition
The Pension Protection Fund (PPF) is a statutory body established under the Pensions Act 2004 to protect members of defined benefit (DB, also known as final salary) occupational pension schemes in England, Wales, and Scotland when their employer becomes insolvent and the scheme cannot meet its obligations. If a PPF-qualifying scheme enters assessment and is confirmed to transfer to the PPF, members receive compensation based on their expected pension entitlement. Members who have already reached the scheme's normal pension age at the date of the employer's insolvency receive 100% of their expected scheme pension. Members who are below pension age at that date receive 90% of their expected pension, subject to an annual compensation cap (which varies by age and is indexed each year). Pensions in payment within the PPF are increased annually by inflation (capped at 2.5% for post-1997 service). The PPF is funded by levies charged to DB scheme sponsors, by assets transferred from schemes that enter the PPF, and by investment returns. It does not receive public funding. If your employer is insolvent and you are in a DB scheme, you should receive communications from the scheme trustees about the assessment process. Members with small DB pensions may also be offered a transfer to a PPF-qualifying insurer.