what’s the Pension safety Fund and will BHS sink it?

A woman walks past a BHS store in Leicester.

what’s the Pension safety Fund?

formally, it’s a government-backed lifeboat for collapsed pension schemes, however it’s miles visible with the aid of some as a dumping ground for tycoons shaking off their liabilities. Now a decade vintage, it affords cowl for 11 million employees with final salary-style pension schemes. so far it has bailed out 800 failed schemes with 222,000 participants, at a value of £1.8bn.

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So taxpayers are at the hook for the £571m hollow in BHS’s pension scheme?

no longer surely. Bailouts are paid for through a levy on all groups that still have those pension schemes, now not the taxpayer. remaining year the PPF advised organizations to cough up £574m to position into the rescue pot. only if the PPF itself failed might taxpayers in all likelihood must choose up the tab.

So I run a small commercial enterprise and have to subsidise yachts in Monaco?

Arguably, sure. Many commercial enterprise proprietors are hopping mad at how tons they must pay into the PPF. as an instance, Sussex-based Southern trying out provides floor trying out offerings for creation corporations, and has a £5m turnover. ultimate 12 months its PPF levy tripled to £25,000, identical to 1 / 4 of the full invoice for presenting pensions to its workers, and greater than its employer tax bill. Its boss, Morris Stevenson, accuses other businesses of dumping liabilities on to the PPF and is irritated he may also have to choose up a part of the bill for the failure of BHS.

might BHS sink the protection fund?

unlikely. BHS’s pension deficit is simplest the 6th or seventh largest to enter the pensions lifeboat in phrases of cost, despite the fact that with 20,000 people affected, it is in the top five in phrases of the variety of humans.

The PPF is financially healthy, having built up a large surplus in recent years. In 2014-15 the excess was £four.8bn, making BHS less costly for now. What’s extra, the way the PPF calculates liabilities way the bailout is possibly to be toward £200m to £300m, not the £571m quoted as the “hollow” in the BHS fund.

Can they move after former boss Sir Philip inexperienced for the cash?
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yes, but whether or not they’ll have any fulfillment is any other remember. The pensions regulator said it become “mission an investigation into the BHS pensions scheme to determine whether it’d be appropriate to use our anti-avoidance powers”. It has legal powers to pursue those “intentionally trying to keep away from their pension responsibilities”. however it’s going to inevitably contain lengthy courtroom movements.

In 2014, after a six-12 months prison struggle, the pensions regulator won a £184m case regarding nearly 2,500 former Lehman Brothers bankers based totally within the united kingdom. but a prison conflict with ITV over the £62m deficit of Boxclever, the television rental company, keeps 13 years after the organisation went bust.

what will BHS employees really get?

The horrific news for the hundreds of modern-day and previous BHS employees below retirement age is that they’ll have their pension entitlements cut. What’s extra, the PPF gives restrained safety in opposition to inflation, and this may especially have an effect on BHS “lifers” (see later).

BHS employees will acquire “repayment” based on 90% of what their pension turned into well worth at the time it have become insolvent – ie they may lose 10%. The most they can acquire is likewise capped. these caps range relying on the recipient’s age and are recalculated every yr. for example, as of 1 April 2016, the most a person elderly sixty five can get is £33,678 in step with 12 months. Entitlements upward thrust in step with inflation every yr – again difficulty to a cap.

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What about absolutely everyone who retired early?

they’ll usually get hold of ninety% of their entitlement primarily based on what their pension become really worth at the time. the earlier someone retired, the lower the annual cap is set, “to compensate for the longer time you’ll be receiving payments”, stated the PPF.

What about retired BHS employees already receiving pensions?

They need to get their full pension with no deductions. “we can also normally pay a hundred% repayment to those who’ve retired on valid sick-health grounds, irrespective of age, and people receiving a pension when it comes to a person who had died at the time that the agency went bust,” says the PPF. future inflation-related rises are capped at a maximum of 2.5% a yr.

What approximately the new freedoms on pensions that took effect a 12 months in the past?

The changes brought in April 2015 do not practice to the PPF. contributors will nonetheless acquire a normal payment from the business enterprise instead of a lump sum.