Special feature: pensions in insolvency — how bright is the future?

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On Guy Fawkes night in 1991, Ian Robert Maxwell, media mogul, former MP and recipient (from Monty) of the military cross, fell from his luxury yacht and died. The shock waves from that sudden death and its aftermath are still felt in the pensions industry today, as it was the collapse of his empire and the effect on pensioners and pension scheme members that caused much of the pensions legislation we work with today.

The ‘Maxwell affair’ challenged politicians to answer two questions: how do we protect pension schemes from the behaviour of their employers and what do we do if those employers become insolvent? This latter question has vexed Parliament and society ever since, as the spectre of employees, made redundant due to the failure of the business and discovering that they also have no savings for their retirement, haunts society. Despite more than 20 years and in excess of a dozen relevant acts of Parliament (as well as more than 1,000 sets of statutory instruments) since Maxwell’s death, it is not clear that the question has, as yet, been satisfactorily answered.

The most significant attempts to answer this question came with the Pensions Act 2004, which established both the Pensions Protection Fund (PPF) to provide pensions to those whose employer had become insolvent and the Pensions Regulator to protect the PPF from too many unnecessary calls on its assets. The structure owed much to the US Pension Benefit Guaranty Corporation (PBGC), which provides pensions for those whose employers have been through the US bankruptcy proceedings and also regulates, to some extent, the pension plans themselves…

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