The Pension Protection Fund Rescues MG Rover Scheme
While it has taken two years for the scheme to receive the green light for admission to the Pension Protection Fund (PPF), the 6,228 pensioners in the former MG Rover scheme will have their pensions protected for the future. Even though the pension scheme itself was declared insolvent when the parent company went under in 2005, the industry funded PPF has taken on all liabilities.
Under the terms of the rescue fund, the PPF will cover the full pension of members already in retirement, and 90% of pensions promised to those not yet in receipt of a pension. Bearing in mind that the MG Rover pension fund members had all but written their pensions off, after very little government led assistance, yesterdays announcement has been well received.
How Does The PPF Work?
The PPF is funded by a levy which is charged against all pension schemes which would qualify for the rescue fund, where they to encounter financial difficulties in the future. Even though there are many industry observers who believe that the government should be investing in the any future rescues, the PPF has helped to stabilise what has been a difficult period for the pension industry.
Who Qualifies?
In theory any pension fund which is unable to cover their financial liabilities would have an argument for admission to the scheme, although current it is only available to schemes which are technically insolvent. MG Rover is one of a number of schemes which have already be admitted to the fund, but there have been a number of schemes refused entry for various reason - commonly because they were not technically insolvent.
Conclusion
While it is good to see a workable solution to pension fund problems, this is not a solution to all funding situations. It has primarily been structured to support only the worst case scenarios, of which there have been a few of late. It is not a bail out fund for pension fund trustees who have mis-managed or not carried out their duties correctly - so beware.
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