Between 31 March 2010 and 22 June 2010, the Department
for Work and Pensions (DWP) undertook a consultation
exercise on the draft regulations to allow for pension sharing/earmarking
orders to be made against compensation in the Pension Protection Fund (PPF),
and for charges to be recovered where an order is not implemented by the
trustees before the PPF Board assume responsibility for the scheme.
The DWP has now considered the consultation
responses from the industry and has published its response.
It has also laid Statutory Instruments 726 and 731 which
came into force on the 6 April 2011.
The regulations set out the information which
must be provided where PPF compensation is subject to a pension
sharing/earmarking order, and the timescales for provision of that information.
A minor change is that the PPF Board may commence the implementation of an
order where not all of the information is readily obtainable.
The calculation of a memberís pension
compensation is made on the basis of the cash equivalent value of the pension
compensation, calculated in line with actuarial assumptions approved by the PPF
Board. As for ongoing schemes, two valuations will be required, one pre-order
and one during the implementation period, as it is possible that the amount of
compensation could change between these dates.
The regulations permit the PPF Board to
recover charges from parties in relation to the costs incurred with sharing
compensation. Charges that are not paid directly can be deducted from pension
compensation. Where one party pays the other partyís charges, the first party
can recover this money as a debt due from the second party.
Compensation Credit Members
Pension compensation credits will not be able
to be transferred externally, and cash equivalents must be applied to create
pension compensation credits within the PPF.
The regulations also cover how pension
compensation credits will be treated for early retirements, survivorsí
benefits, commutation, revaluation and annual increases, and also the
application of the compensation cap. These provisions are broadly in line with
other members of the PPF.
It will not be possible to share PPF
compensation where it is in payment as a survivorís benefit.†