Concerns around no-deal Brexit and its potential effect on the Pension Protection Fund
23 June 2020
Pension experts are concerned about the effects that a no-deal Brexit could potentially have on the Pension Protection Fund (PPF). Due to the economic devastation caused by COVID-19, it is thought that many pension schemes could fall into the PPF.
Where a sponsoring employer of the arrangement is EU-based, and does not have an ‘establishment’ in the UK, issues could arise. The lifeboat protection is currently in place for members of certain UK defined benefit schemes but in order to be eligible, the pension scheme must have its main place of administration in the UK, which will remain unchanged with Brexit. The issue is, that the mechanism for triggering a PPF assessment period where schemes have EU-based employers could potentially be altered from January 2021, following the end of the transition period.
Clive Pugh, from Burges Salmon, commented:
“From my own experience, I would estimate around 20 percent of schemes have an overseas employer or connection. This is a major issue impacting a large number of scheme members.”
A PPF expert confirmed that a no-deal Brexit will not affect the level of protection it provides to eligible UK Defined Benefit (DB) pension schemes that have a sponsoring employer registered in the UK, but the mechanism for triggering a PPF assessment period following an EU employer’s insolvency could be impacted.
To put things into practice, the case of Flybe can be used. Flybe collapsed into administration in March 2020 due to the effects of coronavirus and the decreased amount of flight bookings. The pension scheme was registered in the Isle of Man which meant that members were not entitled to pension protection from the PPF.
Information provided in this news article may be subject to change. Please make note of the date of publication to ensure that you are viewing up to date information. Download the CIPP's Payroll: Need to know - your guide to payroll legislation and reporting for the most up to date data.