Pensions industry folk do love a good technical challenge. We certainly had fun with one client where the scheme's principal employer was itself a trust.
Why was that an issue? Well, at the time we took the client on, the identity of the statutory employers for Pension Protection Fund (PPF) purposes was not at all clear.
Having taken legal advice, we discovered the principal employer would not be eligible for PPF entry in the event of insolvency of the sponsoring trust - and this was a significant risk for some of the pension scheme's members. As a pension trustee, we needed to act in the best interests of members so we looked for a solution that would provide them with greater protection.
With several participating employers and yet more companies in the wider group linked to the main trust, we had a few options to consider. These included using a flexible apportionment arrangement (FAA) or making a change to which legal entity was the pension scheme's principal employer.
In the end, a fortunate twist of fate saw a change in legislation that resolved the situation for us. However, there were other benefits to the process - greater certainty, more security and a stronger covenant assessment.
You can learn more in the detailed pension case study: Trust as a principal employer
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Vidett is a trading name of Vidett Governance Services Limited, Vidett Trust Corporation Limited & Vidett HRT Limited
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