Atkin trustees, actuaries, consultants & administrators

Distressed schemes should pay PPF level benefits

There are some schemes that would appear to destined for the PPF. They are supported by weak company covenants and there appears to be little prospect of the assets ever being sufficient to secure the benefits in full were the scheme to wind up. For larger schemes, it might be possible to enter into a regulated apportionment arrangement with the PPF leaving a viable company behind. However, these can be very expensive and so usually beyond the reach of smaller schemes. So what about the remainder?

What tends to happen, is that at some point it will become apparent that the company is no longer viable and the scheme will be wound up. In this situation there would appear to be very few winners; 

- the company is wound up and its employees made redundant 

- the PPF is only able to get what they can from the wind up value of the company (usually at a severe discount) 

- the members benefits are reduced to PPF levels

It would therefore appear sensible for these firms to continue as long as possible albeit that it is not at the expense of the PPF (either due to members being paid their benefits in full or the company paying insufficient contributions to meet the PPF drift). Figuring out whether the contributions are covering PPF drift is a significant exercise in itself so is there an alternative?

How about if these schemes were able to reduce their benefits to PPF levels immediately – this would remove the issue of PPF drift and, at one stroke, substantially reduce the amount of the scheme deficit which the company is trying to manage giving it a much better chance for survival. Members would, of course, miss out in the short term. However, as part of the arrangement the Trustees could agree an element of profit share with the company which would remain in place even if the scheme generates a surplus. The Trustees could then use this surplus, when appropriate, to augment member’s benefits – an option not available under the PPF.


Appropriate schemes could be those which are unable to agree recovery plans less than 15 years, with an onus on the employer to demonstrate that any higher level of deficit contributions would be unaffordable.

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With our previous advisors we very rarely went to them for consultation advice, as we had little faith in them. We tended to use solicitors, and to that extent the cost to the Company has been significantly reduced, and we are very happy with Atkin & Co’s approach and guidance here. We are all more than happy with our move to Atkin & Co.

Paul, Administration and Actuarial client