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Insolvency Events

This section explains the different circumstances that can trigger a Pension Protection Fund assessment period.

Legislation sets out what the Pension Protection Fund will consider as an insolvency event. These are consistent with the provisions of the Insolvency Act 1986, and have been developed in consultation with the Insolvency Service.

Insolvency events vary depending on whether an employer is an individual , a company or a partnership.

Some employers may have a status that excludes them from having an insolvency event.  These employers' schemes may still be able to enter an assessment period (see Section 128 of the Pensions Act 2004).  Further guidance will be available on this site shortly.

Most formal insolvency proceedings are covered with the main exception being a members’ voluntary liquidation. This is because a members’ voluntary liquidation is a solvent form of liquidation and is, therefore, not appropriate for consideration for compensation.

When an insolvency event occurs in relation to the employer of an occupational pension scheme, the insolvency practitioner has a duty to notify the Pension Protection Fund, the Pensions Regulator and the scheme trustees or managers about the occurrence of the insolvency event.

The role of the insolvency practitioner is set out in legislation (Sections 120-122 of the Pensions Act 2004), including details of who should be notified of an insolvency event in relation to the employer of an occupational pension scheme, the form and content of the notice and the timeframe in which that should be done.

If an insolvency event relates to the employer of an eligible scheme and is a qualifying insolvency event then this will trigger the beginning of an assessment period. During this period the Pension Protection Fund will assess whether or not it must assume responsibility for the scheme.

The insolvency practitioner’s role is therefore vital in informing the Pension Protection Fund, the Pensions Regulator and trustees or managers of the scheme about the insolvency event and in triggering action to determine whether the scheme qualifies for the Pension Protection Fund.

Having submitted a notification regarding the insolvency event, the insolvency practitioner is then required to issue a further notice when he can determine whether a scheme rescue either has occurred or is not possible (according to the criteria set out in Regulations).

The length of time between the insolvency event occurring and this notice being issued depends on the circumstances of the employer, the complexity of its affairs and what form of insolvency proceedings it has entered into.