Pension Protection Fund (PPF) Rules

Marcon

ttellahzab said:

Hi @Marcon,

With respect to "There's nothing to explain; it's quite simply an HMRC rule.". I understand the need for a rule but i want to know why this rule exists even if its typical to all pension providers. At this time i simply think its unfair.

It isn't 'typical to all pension providers' - it applies to all providers (including the PPF). Providers therefore have no say in whether or not to apply it.

There will always be someone who objects to something because they don't like the impact it has on them personally. The vast majority of people aren't impacted by this bit of legislation - and in any case, since when did HMRC need a reason for a rule?!

That's the position, it isn't likely to change, and you almost certainly aren't going to get an 'explanation' you find satisfactory. 

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

OldScientist

Marcon said:

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

I should have looked before my previous post, according to https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/pension-protection-fund-transfers/ and https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-pension-protection-fund transfers out from the PPF do not appear to be allowed regardless of size.

I wasn't aware of the £40k cap (in 2022) mentioned in the second of the two links above - another way the PPF decrease their liabilities (as well as the 10% reduction in future benefits for current workers).

Marcon

OldScientist said:

Marcon said:

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

I should have looked before my previous post, according to https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/pension-protection-fund-transfers/ and https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-pension-protection-fund transfers out from the PPF do not appear to be allowed regardless of size.

I wasn't aware of the £40k cap (in 2022) mentioned in the second of the two links above - another way the PPF decrease their liabilities (as well as the 10% reduction in future benefits for current workers).

However unwelcome the reductions are for those whose schemes enter the PPF (and it's entirely understandable why people are both dismayed and upset), the pre-PPF days would have given a vastly worse outcome. If the employer failed and the pension scheme was underfunded, members could and did lose all their pension entitlements, with no means of redress of any description. 

OP might want to consider that, rather than moaning because pension legislation doesn't let them do exactly what they want.

Moonwolf

Marcon said:

OldScientist said:

Marcon said:

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

I should have looked before my previous post, according to https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/pension-protection-fund-transfers/ and https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-pension-protection-fund transfers out from the PPF do not appear to be allowed regardless of size.

I wasn't aware of the £40k cap (in 2022) mentioned in the second of the two links above - another way the PPF decrease their liabilities (as well as the 10% reduction in future benefits for current workers).

However unwelcome the reductions are for those whose schemes enter the PPF (and it's entirely understandable why people are both dismayed and upset), the pre-PPF days would have given a vastly worse outcome. If the employer failed and the pension scheme was underfunded, members could and did lose all their pension entitlements, with no means of redress of any description. 

OP might want to consider that, rather than moaning because pension legislation doesn't let them do exactly what they want.

I just realised that there will probably be a lot of people too young to recollect the scandal of the Mirror Group and Robert Maxwell's raids on the pension funds.

Maxwell died 33 years ago.

FIREDreamer

Moonwolf said:

Marcon said:

OldScientist said:

Marcon said:

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

I should have looked before my previous post, according to https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/pension-protection-fund-transfers/ and https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-pension-protection-fund transfers out from the PPF do not appear to be allowed regardless of size.

I wasn't aware of the £40k cap (in 2022) mentioned in the second of the two links above - another way the PPF decrease their liabilities (as well as the 10% reduction in future benefits for current workers).

However unwelcome the reductions are for those whose schemes enter the PPF (and it's entirely understandable why people are both dismayed and upset), the pre-PPF days would have given a vastly worse outcome. If the employer failed and the pension scheme was underfunded, members could and did lose all their pension entitlements, with no means of redress of any description. 

OP might want to consider that, rather than moaning because pension legislation doesn't let them do exactly what they want.

I just realised that there will probably be a lot of people too young to recollect the scandal of the Mirror Group and Robert Maxwell's raids on the pension funds.

Maxwell died 33 years ago.

Captain Bob bob bob. Plundered the Mirror Group Newspapers Pension Scheme. Went swimming in deep waters.

Father of Ghislane Maxwell, a family of high moral standards. His yacht was named after her.

Marcon

Moonwolf said:

Marcon said:

OldScientist said:

Marcon said:

OldScientist said:

If transfers out are fairly priced they should reduce the liabilities of the PPF by the same amount as the payout.

...but would significantly increase the workload for the PPF, thus increasing costs for the DB schemes which have to shell out a substantial amount as a 'PPF Levy' payment each year.

I should have looked before my previous post, according to https://www.onlinemoneyadvisor.co.uk/pensions/pension-transfers/pension-protection-fund-transfers/ and https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-pension-protection-fund transfers out from the PPF do not appear to be allowed regardless of size.

I wasn't aware of the £40k cap (in 2022) mentioned in the second of the two links above - another way the PPF decrease their liabilities (as well as the 10% reduction in future benefits for current workers).

However unwelcome the reductions are for those whose schemes enter the PPF (and it's entirely understandable why people are both dismayed and upset), the pre-PPF days would have given a vastly worse outcome. If the employer failed and the pension scheme was underfunded, members could and did lose all their pension entitlements, with no means of redress of any description. 

OP might want to consider that, rather than moaning because pension legislation doesn't let them do exactly what they want.

I just realised that there will probably be a lot of people too young to recollect the scandal of the Mirror Group and Robert Maxwell's raids on the pension funds.

Maxwell died 33 years ago.

I was a volunteer adviser for OPAS (later became TPAS/MoneyHelper) at a time when DB pension schemes were heavily penalised by tax charges for being in surplus, but had no minimum requirement in terms of funding.

I remember all too vividly the sense of utter helplessness I felt when I had to tell a distraught individual that their long-promised, eagerly anticipated pension was either decimated in terms of the amount they would receive, or they would receive nothing at all.

Compare that stark message with telling someone they would 'only' get 90% of what they expected, and possibly lower increases to their pension once in payment. The PPF isn't a perfect answer, but fretting and fuming about wrinkles like trivial commutation...move on.

Marcon

ttellahzab said:

Hi All,

I need help.

You don't need help. Just be grateful the PPF exists, even if it doesn't let you do exactly what you want - see my post above and give thanks!

snowlaser

ttellahzab said:

Hi @Marcon,

With respect to "There's nothing to explain; it's quite simply an HMRC rule.". I understand the need for a rule but i want to know why this rule exists even if its typical to all pension providers. At this time i simply think its unfair.

The government provides tax relief on pensions to allow people to save for an income in retirement.  Normally if you transfer your DB pension to a DC scheme you can then draw it all in one go no matter how large it is (what's called an UFPLS) BUT you incur a very large tax by doing so.

However, I believe that you cannot transfer out of the PPF.  They set up the PPF to provide compensation for DB schemes that go bust - before that it was possible to just lose your pension completely even if you were a day from retirement.

Whilst you may think it's unfair you can't take it as a lump sum, that's not the purpose that the PPF was set up for. 

Cobbler_tone

I love PPF. It gave a vital layer of protection from the crooks like Maxwell. My scheme is currently funded at 105% but you never know what may happen in the future, although the members and liabilities must be diminishing each year!