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Eligible Schemes

The Pension Protection Fund covers certain defined benefit occupational pension schemes and defined benefit elements of hybrid schemes.

Schemes eligible for protection by the Pension Protection Fund will be liable to pay the Pension Protection Fund levies and the scheme members may be entitled to compensation should an insolvency event occur in relation to the scheme's employer.

However, some schemes will be exempt from the Pension Protection Fund. Regulations will set out those schemes which are exempt from the Pension Protection Fund. This list is not exhaustive, however it is likely that the following pension schemes would be exempt:

• unfunded public service schemes;
• public sector schemes providing pensions to local government employees;
• schemes to which a minister of the Crown has given a guarantee;
• schemes which are not tax approved (or tax registered from April 2006) nor relevant statutory schemes under the tax rules for pension schemes;
• schemes with fewer than two members;
• schemes providing death in service benefits only;
• schemes which are relevant lump sum retirement benefit schemes;
• Chatsworth Estate Settlement Pension Scheme;
• schemes with fewer than 12 members where all members are trustees of the scheme;
• cross border schemes where the pension scheme in question is not UK registered;
• a superannuation fund as is mentioned in section 615(6) of the Income and Corporation Taxes Act 1988.

Schemes with a Crown guarantee will be exempt from the Pension Protection Fund. Schemes with a partial Crown guarantee will only be liable to pay the Pension Protection Fund levies for that part of the scheme that does not have a Crown guarantee.

Schemes which began to wind up or were completely wound up prior to 6 April 2005 will be exempt from the Pension Protection Fund.

In addition, except in certain circumstances, schemes where a compromise agreement has been reached between the scheme trustees and the employer concerning a debt under Section 75 of the Pensions Act 1995, will also be exempt from the Pension Protection Fund.  

Exempt schemes will not be liable to pay the pension protection levies and also their members will not be eligible for Pension Protection Fund compensation.

The Pension Protection Fund will not be able to assume responsibility for eligible schemes in certain circumstances, for example, when a scheme has not been eligible throughout the three years previous to an assessment date.  Further guidance will be issued on this site shortly.