Trusts Law: The Pension Protection Fund

Paper Summary:

The Pension Protection Fund (PPF) was introduced by the Government under the Pensions Act 2004 in order to protect members of private sector defined benefit schemes whose firms become insolvent with insufficient funds in their pension scheme. This paper begins with background discussion on the overall operation of the U.K. pensions system in order to demonstrate the context within which the defined benefit occupational trust scheme, and thus the protection conferred by the PPF, operates. It then examines the origins of the fund amid a growing crisis of deficient pensions funds, before detailing how it operates in practice. The key arguments in support of the title statement are then discussed, and evaluated through consideration of measures that have been taken in order to alleviate any such unnecessary burdens.

Outline:
Abstract
Background
The Role of the Trust in Pensions and the Growing Pensions Crisis
The Origins and Operation of the Pension Protection Fund
The 'Burden' of the Pension Protection Fund
Easing the Burden
Conclusions: An 'Unnecessary' Burden?

From the Paper:

"Occupational pension schemes are in almost all cases established in the form of a trust . There are a number of advantageous reasons for this. Firstly, the use of the trust instrument allows for a number of benefits in relation to tax liability; provided that the scheme is 'approved' by the Inland Revenue, the investments made using the trust fund are free from both income and capital gains taxation, whilst additional tax reliefs exist in respect of the contributions to the fund from both the employee and the employer . Secondly the trust represents a "cheap and flexible vehicle" , allowing a scheme to be established in any such way as the employer wishes; consequently allowing it to set the 'balance of power' over the fund in its favour."

Sample of Sources Used:

• Bannister, J. & Banks, K. "Distance Learning" Lawyer (2005) 19(40), pp.24
• Deakin, S. & Morris, G. "Labour Law" (4th Ed.) Oxford: Hart Publishing (2005)
• "DWP aims to restore pensions confidence" Occupational Pensions (2004) 203 pp.8-15
• Gordon, T. "Playing the PPF Game" Pensions World (2004) 33(5), pp.45
• Jeffries, J. & Pinsent, H. "Pensions Litigation - Hot Topics" Finance and Credit Law (2005) 7.6(1)

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