Updated: July 19, 2019

Pension Protection Fund Transfers

Can you transfer your pension out of the Pension Protection Fund? Find out what your options are in this guide

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: July 19, 2019

In April 2005, the UK government set up the Pension Protection Fund (PPF) to protect people in defined benefit schemes, but many of the people this affects are unsure exactly what it means for them, their retirement plans and their pension transfer options.

And that’s exactly why we’ve put together a guide on what the PPF do, what to expect and what you can do with your pension through it.

What is the Pension Protection Fund (PPF)?

The Pension Protection Fund (PPF) was set up on 6 April 2005 by the government to protect people with defined benefit (final salary) pensions. If you are a member of a defined benefit scheme, and your employer becomes insolvent therefore going out of business thus leaving the pension scheme without sufficient money, the PPF (after an assessment period) would take on your pension and may be able to compensate you.

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Can I transfer out of the Pension Protection Fund (PPF) ?

In short, No. Transfers from the pension protection fund are not permitted.

If the scheme has yet to enter into an assessment period with PPF, you should still be able to request a transfer value from your scheme (usually valid for 3 months) and transfer out to another scheme.

Can I use Pension Freedoms to transfer from the Pension Protection Fund?

No. You are unable to do a transfer out of the pension protection fund, the pension freedom does not apply with PPF. You are unable to make transfers or drawdown/ withdraw cash lump sums before retirement.

When can I get my pension from PPF?

You are able to access your pension from the PPF when you retire. The earliest you can do this is at age 55 – unless you have a right to take your pension earlier under the rules of your former pension scheme.

If you are looking at getting your compensation earlier you need to request a retirement illustration from the PPF. They will then confirm if you are eligible to receive your compensation early.

How much is the PPF compensation?

Once your pension has gone into the PPF scheme you will receive less than if your pension scheme had not gone bust and your pension not had to go to the PPF.

For members below normal retirement age (NRA), compensation of 90% of benefits will be paid by the PPF. However, there is a yearly compensation cap:

From the 1 April 2019, the cap at age 65 is set at £40,020, so, as the compensation is 90%, the most you would receive is £36,018.

Could I take the PPF compensation as a lump sum?

It is possible that you may be able to receive the whole amount of compensation from the PPF. This is known as a ‘trivial lump sum’.

However, you will have to meet the following criteria:

  • The value of all pension benefits must be less than £30,000 (to include all pension schemes)
  • You must be aged between 55 and 75.
  • If you were considering taking lump sums from other pensions you would have to do it all within 12 months.

If you meet the criteria above and decided to take a trivial lump sum, 25% would be paid tax-free.

Speak to a pensions expert about the Pension Protection Fund

If you have questions about the Pension Protection Fund (PPF) and want to speak to an expert for the right advice, call Online Money Advisor today on 0808 189 0463 or make an enquiry here. We don’t charge a fee and there’s no obligation on your part.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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