The PPF provides protection for members of defined benefit pension schemes if their sponsoring employer becomes insolvent and if the pension scheme has insufficient assets to provide a minimum level of benefits.

Prior to the PPF’s introduction in 2005, many members of occupational pension schemes suffered large reductions in their pension benefits if their employer became insolvent with insufficient money in the pension scheme. The PPF has undoubtedly added security for members and provides individuals with a level of protection previously absent.

As at 31 March 2018 the PPF had around £32 billion worth of assets under management and was paying compensation to 250,000 members.

The PPF is financed by levies on nearly all private sector defined benefit pension schemes, together with any recoveries it can make from insolvent employers.

The levy is like an insurance premium – any employer who has a defined benefit pension scheme (even if it is now closed to future benefit accrual) must contribute towards the finances of the PPF. The levies are payable from scheme assets, but ultimately the sponsoring employer will pick up the cost.

Total levies required from all schemes

Each year the PPF determines how much money it needs. The total levies which the PPF has said they require each year, as well as the actual levies raised, have been as follows:

Source: PPF/TPR