PPF entry and overseas employers
By Ian Greenstreet
The case of Olympic Airlines has highlighted the difficulty for a pension scheme with an overseas employer in gaining entry to the Pension Protection Fund (PPF).
Most UK registered defined-benefit schemes are ‘eligible’ for the PPF and are therefore required to pay the annual levy. However, in order to actually obtain support from the PPF, the employer in relation to the scheme must suffer a ‘qualifying insolvency event’. These events are listed in the legislation and all concern UK insolvency proceedings. This means that foreign insolvency proceedings against an employer will not trigger entry to the PPF. It is necessary for the scheme trustees (as creditors) to effect secondary insolvency proceedings in the UK. This may prove impossible if the employer does not, at the time of the secondary proceedings, have an ‘establishment’ in the UK carrying out genuine economic activity.
The pensions minister, Steve Webb, has (after some months of pressure) confirmed that the government is ‘actively exploring whether it can amend PPF legislation on employer insolvency to enable members of the Olympic Airlines pension scheme to benefit from the PPF’. We understand that this may well go wider and that the government is in fact looking at this issue generally, so that a similar situation does not arise in relation to other schemes in the future…
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