Is the PPF assessment process getting value for DB members?

Following the insolvency of a scheme sponsor, a scheme automatically enters the PPF and has to go through what is known as an assessment period before it is eligible to transfer.

The biggest improvements will come from legacy defined benefit schemes getting their respective houses in order

This process often involves the completion of many complex tasks including verifying member data, auditing benefit payments made to members and correcting any under or overpayments.

The scheme funding level is also assessed (via a section 143 valuation) and if a funding shortfall is identified, the scheme is then eligible for transfer to the PPF.

The main aims of the assessment process are to provide certainty for members of affected schemes as quickly as possible and provide value for money for the PPF and levy payers.

Panel programme

As part of 2010’s ‘assess and pay’ programme, the PPF embarked on the appointment of a series of specialist panels to deliver improvements to the efficiency of the assessment process.

In 2011, the actuarial valuation panel was established to deliver section 143 valuations and this was followed in 2012 by the specialist administration panel, which undertakes assessment period tasks such as data auditing and benefit auditing.

And in September 2013, the trustee advisory panel was launched, where trustees with relevant experience and expertise are appointed to assist existing scheme trustees in the assessment process.

The PPF also restructured internally, with the creation of the roles of scheme delivery associates, scheme delivery consultants and panel managers to work with scheme trustees and the panel advisory firms to achieve the common goals of certainty and value for money.

The success of specialist panels

Through the establishment of specialist panels to undertake assessment period tasks, the process is delivering tangible value to scheme members and levy payers. The panels have achieved:

• a reduction in the average assessment period to less than 24 months from 36 months;

• 75 per cent of schemes completing the assessment process in less than two years;

• a reduction in the overall cost of the assessment process;

• a better understanding of cost and the ability to control cost in the assessment process; and

• an improvement in the quality and consistency of work undertaken during the assessment period.  This has been achieved through a small core of experts sharing expertise and best practice. 

The efficiency of the assessment process is also a contributory factor to the ongoing success of the PPF more widely. 

Further improvements to come

Building on the success of its existing panels, the PPF is looking to complete the set in the coming months with the appointment of an auditors panel and an assessment process legal panel – the announcement of the audit services panel is imminent, with the legal panel expected to follow in early 2014.

These panels will ensure all major assessment process tasks are covered by members of specialist panels. I fully expect this to drive further efficiencies and improvements in quality – this will ultimately lead to shorter, less costly assessment processes and will provide greater certainty for members and levy payers alike.

Frankly, the biggest improvements to the assessment process will then come from legacy defined benefit schemes getting their respective houses in order in relation to the quality and completeness of member data and in relation to the accuracy of benefits being paid to members now and in the future.

This can be done in relatively straightforward ways such as ensuring records tie up with government agencies such as National Insurance Services to Pensions Industry for contracted-out benefits and conducting an internal review of scheme benefits to demonstrate it is being administered in accordance with the scheme rules.

Alan Collins is a director at consultancy Spence & Partners