TPR has played a blinder. It has a role to reduce the risk of calls on PPF. So it convinced the pension industry to ignore PPF’s existence even as sponsors funded it with hefty levies.
If the PPF was a loss-adjustor it would be award winning. It pays no compensation but makes sure the premia keep coming
Why did all those clever pension lawyers and consulting actuaries fall for TPR’s confidence trick? How did the PPF end up with a £12bn surplus while employers had to stump up levies to fund a tsunami of claims that never materialised.
Now public policy is changing and TPR has moved on.
TPR has published a DB funding code which at last acknowledges that Trustees don’t need to think about the PPF
Paragraph 64 of “The Funding Regime” section of the new DB Funding Code sets out a sensible position, which was probably always the case.
64. When performing their duties under Part 3 of the Pensions Act 2004 , trustees should not take advantage of the existence of the PPF as a justification for acting in a way which would otherwise be inconsistent with those duties
Trustees cannot invest like there was no going bust, but nor can they jeopardize their sponsors and prioritise the safety of a lifeboat when the ship could have been repaired.
How to see the PPF?
The reality remains the same. It’s the spin that’s changed. And why has the policy changed? Looks like someone has been checking precedents.
Referring to the case of Hope-v-Independent Trustee Services : 2009, Para 106 / 119:
“There is no single all-purpose answer to the question whether the PPF is a relevant consideration……. It all depends on the context and the purpose”
“…..the PPF is in certain contexts a legitimate matter for trustees to take into account…..”
The Judge wanted to avoid “the dangers of invoking public policy in relation to a situation which is not before the Court”. The position was re-iterated in Brass-v-Goldstone 2023.
Paragraph 64 means that in TAS300 V2 actuarial exercises the probability of loss and gain can be assessed without a folklore-based assumption there is no safety net. All options must remain open.
So let’s look at what is happening right now?
The Trustees of the Thames Water Pension Schemes are refusing help from the capital markets which are offering to co-sponsor the scheme in the shadow of the impending collapse of the sponsor itself. It looks like the Trustees are taking advantage of the existence of the PPF to me.
This weekend, Wilko is reported to be sitting in the PPF assessment
The employer claims it has no obligation to the fund, but there’s an offer to the trustees from a capital backed sponsor which would mean former workers would have their pension paid in full, all it would take would be some co-operation with the administrator. This scheme should not be in the PPF and the Trustees should be acting as if the PPF was not there.
McKay & Co, whose Chair of Trustees is a former employee of the PPF is also sitting in PPF assessment and Communisis, with the same chair, shares the same fate.
The PPF should not be pension’s Hotel California
Trustees are putting their member’s pensions at risk by flirting with the PPF.
If these schemes go into the PPF , the Trustees will have discharged their obligation to the Pensions Regulator. Will they have acted as if the PPF did not exist? I don’t think so.
Once schemes are in the PPF proper , they can check out any time they like, but they can never leave.
The PPF is a success and no longer needs its TPR minder. Trustees cannot act in their member’s best interests while ignoring help from the market. The PPF cannot become the destination of choice for the do-nothing trustee with an under-funded scheme.