Steven Cameron, Pensions Director at Aegon said: “Aegon recognises the valuable protection the PPF offers, but it’s about time it considers modernising its rules so that individuals can seek advice on the pros and cons of transferring out to enjoy a more flexible income in retirement.”
Pension scheme members rescued by ‘lifeboat’ Pension Protection Fund will lose access to Pension Freedoms
• Before Carillion, over 230,000 individuals had been transferred into the PPF
• Those in PPF given no choice to transfers out into more flexible pensions
Now is the right time to modernise the PPF
The recent failure of Carillion, the latest high profile employer to become insolvent with a severely underfunded pension scheme, has highlighted the benefits of the Pension Protection Fund (PPF).
Individuals transferred into the PPF receive payments mirroring the shape and timing of the scheme pension they would otherwise have received, but crucially this means they have no freedom to choose a flexible income.
Steven Cameron, Pensions Director at Aegon said: “The PPF plays an important role in protecting members of inadequately funded defined benefit pension schemes where their employer becomes insolvent. However, one significant downside is that once in the PPF, individuals lose the ability to choose the best way to take their pension.
“There’s currently a huge demand from individuals seeking advice on transferring from defined benefit to defined contribution schemes, and for many, the reason is to access the pension freedoms the Government introduced in 2015. As things stand, once in the PPF, individuals lose the ability to transfer to a defined contribution scheme and then to choose to draw their retirement income in a flexible way to match their retirement needs.
“Figures as at last October, before the Carillion collapse, show over 230,000 individuals have been transferred into the PPF since it was set up. Over 125,000 are already receiving payments but a further 100,000 are still to receive their first payment. For them, while benefitting from protection, they lose access to the new pension flexibilities which are proving very popular. The PPF was designed before these freedoms were introduced and we believe it’s now time to explore how best to modernise the PPF’s approach. This would allow individuals to seek advice on whether transferring out of the PPF into a Defined Contribution arrangement would be suitable for their circumstances.”
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