Pension Protection Fund

MQT on 2009-11-18
Session date: 
November 18, 2009
Question By: 
Gareth Bacon
GLA Conservatives
Asked Of: 
The Mayor


TfL are seeking a judicial review against the premium levied by the PPF against the likelihood of the pension plan becoming insolvent and argue that instead of £9m in 2009 and 2010, it should be £252,000 instead. Since the PPF was created in 2005 how much does TfL estimate it has been forced to over pay? Have the other GLA Group members faced the same problem?


Answer for Pension Protection Fund

Answer for Pension Protection Fund

Answered By: 
The Mayor

LDA As the LDA does not operate their own Pension Fund, but contributes to three main Schemes (Principle Civil Service Pension Scheme, the Local Government Pension Scheme and the Homes Communities Pensions Scheme). They are not liable to pay funds into the Pension Protection Fund directly.

All the funds which the LDA contribute to are actuarially assessed for viability and liquidity by the relevant scheme administrators (e.g. the Local Government Pension Scheme is administered by the London Pension Fund Authority (LPFA) on behalf of the LDA; the LPFA will inform the LDA of any shortfall requiring funding).

TfL The TfL Pension Fund is governed by the Pension Act and as a result is classed as a private sector pension arrangement which is liable to pay Pension Protection Fund (PPF) levies. The TfL Pension Fund has paid £5,778,024 in respect of the Public Sector Section of the Fund covering the years 2005 /06 to 2009/10. The pension schemes in which other members of the GLA Group participate are statutory schemes and are not required to pay a levy to the PPF.

The judicial review application which has been made concerns the sections of the Fund to which the employees of the former Metronet Companies belong (the Metronet Sections). Following those companies entering PPP Administration, on 5 September 2007 TfL became jointly and severally liable for the pension obligations of the Metronet Sections, thus affecting 'scheme rescues', which meant that the PPF was not called upon to meet the Metronet Companies' obligations to those sections.

If the PPF had used TfL's credit rating to assess the levy for those sections, rather than the rating of the Metronet Companies, the levy which the TfL Pension Fund is now liable to pay in respect of years 2008/09 and 2009/10 would have amounted to £252,000 instead of just over £9 million.

GLA The Greater London Authority is a scheduled body of the Local Government Pension Scheme (LGPS) which, by law, is exempt from the Pension Protection Fund levy.

LFEPA The firefighter pension schemes are not covered by the Pensions Protection Fund, they are pay as you go schemes, with benefits paid from employer and employee contributions. Any fund deficit is covered by payments from the Department for Communities and Local Government and HM Treasury. This is the case for both the new and old firefighter pension schemes.

Non-frontline staff at the London Fire Brigade are part of the LGPS - so the GLA answer on LGPS will cover them too.

MPA The MPS/MPA are not part of the scheme and are therefore not required to pay a levy to the Pension Protection Fund.

Police officers and MPA/police staff are members of the Police Pensions Scheme {PPS} or the Principal Civil Service Pension Scheme {PCSPS} respectively. The Home Office acts as scheme manager for the PPS and Cabinet Office for the PCSPS.

Both schemes are final salary, defined benefit schemes that have no managed pension fund; because in each case the cost is met from revenue.

For the PPS there is a notional account that represents the fund. The income comprises a combination of employee pension contributions, employers contributions and transfer values. The Home Office provides a top up grant to cover any deficit in the fund required to meet the costs.

Similar provisions apply to the PCSPS, where costs are paid from the Civil Service Superannuation Vote to which all participating bodies make employer and employee pension contributions.