Trustees of schemes within the Pension Protection Fund (PPF) assessment period face a dilemma with regard to the discharge of any DC benefits.

The PPF’s requirement to discharge defined contribution (DC) benefits does not in any way reduce the trustees’ governance responsibilities towards the DC benefits either in the way they are managed within, or ultimately transitioned from, the scheme. However, concluding the exercise earlier rather than later can help mitigate scheme expenses.  

Most schemes within the PPF assessment period are not in wind-up.  As such, the options available to discharge DC benefits are limited (unless the DC section can be deemed 'segregated'.) Winding-up lump sums cannot be paid and, without member consent, S32 policies cannot be used to secure protected rights or certain other benefits (e.g. where members have more than five years’ pensionable service).  

Even where S32 policies can be used, many trustees feel uncomfortable with their use as they can detrimentally affect the shape and value of members’ benefits. For example, death benefits payable to members’ beneficiaries can be reduced by up to 40%.  

But perhaps the biggest issue that trustees have to address is whether, having spent many years supporting members in their funding, investment and retirement decisions, they are comfortable moving members’ benefits into insurance policies where no such support is afforded.  

A new solution, known as XPT PPF Solutions, offers an effective means of discharging the DC benefits, whilst protecting the shape and value of members’ benefits and providing them with valuable ongoing support. 

To download the XPT PPF Solutions factsheet, click here