Pension Protection Fund (PPF)+ Buyout

A significant number of defined benefit (DB) schemes have cash funding requirements that exceed the resources of the employer, or in the worst case the employer has already become insolvent. When it is no longer possible for an employer to provide the funds needed for full benefits, their next best aim would be to provide members with benefits that are greater than those provided by the Pension Protection Fund (PPF).

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In most cases, the only way to do this is through a PPF+ buyout transaction. As the name indicates, a PPF+ buyout deal enables scheme members to receive benefits above the PPF level of compensation from an insurance company.

THE KEY DIFFERENTIATOR – OUR EXPERIENCE

Our team’s industry-leading experience of these types of deals encourages insurers to provide quotations. Generally, more quotations translate to cheaper prices and therefore better results for scheme members.

 

Key Differentiator

THE PROCESS

Handling a PPF+ buyout deal requires specialism; if the pricing is attractive then the scheme should be prepared to transact quickly.

 

PPF + Buyout Process

 

Ideally, all of the above four steps should be completed within 18-24 months (and the bulk annuity policy should usually be in place within the first 6-9 months to provide a stable foundation).

WHAT IF THE SITUATION IS NOT RIGHT TO TRANSACT AT THE FIRST ATTEMPT?

In such a situation, price monitoring and negotiation with insurers will be vital. JLT’s latest insurer price tracking technology enables our clients to get full actual insurer quotations quickly and easily. We are also able to cost-effectively commence daily bulk annuity price tracking once a full insurer price has been obtained. This is useful

  • If debt recoveries, unsold company shares and/or a borderline asset position (relative to the 100% PPF level) are obstructing an immediate transaction, or if negotiations with the employer are on-going
  • To provide information to the PPF about the position relative to the 100% PPF benchmark

Once any barriers to a transaction are overcome, a rapid transaction will be possible because all insurer quotations (even while price monitoring was taking place) will have been obtained using full individual member data.

PPF ADMINISTRATION EXPERTISE

Data Audit and Cleansing

We possess broad data audit and cleansing expertise which we have developed through our hands-on experience by completing large numbers of discontinuance and winding-up cases. Our areas of expertise include

  • Rapid audit process
  • GMP reconciliation and equalisation
  • Detailed benefit confirmation with members
  • Personal details verification

PPF Administration Support

Up to 2017, JLT has transferred more cases to the PPF (including PPF and FAS cases) than any other organisation. This has enabled us to

  • Have a solid working knowledge of PPF benefits and procedures
  • Have a thorough understanding of the assessment period process
  • Have automated systems for implementing the PPF’s approach to GMP equalisation
video

PENSION PROTECTION FUND (PPF)+ BUYOUT CASE STUDY

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