The Pension Protection Fund's (PPF) efforts to implement a solution to the failure of insolvency practitioners (IPs) to advise them and the Pensions Regulator (TPR) about pension schemes of insolvent companies is not 'foolproof', warns Alexander Forbes Trustee Services.

The firm, which in November 2008 first brought to the PPFs attention that more than 200 IPs had been flagged up to their professional body for such failures, believes the newly launched s.120 'Insolvency Event Notice' - the PPF's online reporting system for IPs to fulfil regulatory obligations - has its limitations.

The Pensions Act 2004 states that IPs have two weeks to file an s.120 to TPR, the PPF and trustees and managers of the scheme following their appointment or awareness of the employer's position as sponsor of an occupational pension scheme.

The paper-based system saw failings to report within the deadline, resulting in unknown schemes floating to the surface months after their initial appointment to an insolvency.

"The PPF has responded extremely well to the concerns we highlighted last year," commented Darren Toms, associate director at Alexander Forbes Trustee Services.

"Any IP who uses the online s.120 reporting system within two weeks of their insolvency appointment is deemed to have reported in full even if an unknown scheme comes to light much later in the day. IPs must be aware however that the onus is still on them to report on time. If they do not use this facility and a late notice is received by the PPF then the PPF will report them to their professional body, regardless of the excuse, and it is likely that action will be taken against them."

However, the new system does not fully discharge an IP's full responsibility towards employer sponsored pension schemes in an insolvency.

"The system isn't foolproof and IPs must not be lulled into a false sense of security that they have met their obligations. During an economic downturn employer's financial commitment to their schemes - especially DC schemes - is often being breached with disastrous and expensive consequences and it's a fact that the pension scheme is often the biggest creditor in an insolvency event. Add in the fact that there will be many non-registered pension schemes that the online facility will miss, and it's clear that IPs have more to think about than simply reporting schemes online," Toms added.

Meanwhile, the PPF has appointed Hewitt Associates as its longevity risk consultants, to advise on issues surrounding the topic. The PPF will work with Hewitt to assess the extent of its current and future longevity risk exposure. The organisations will also work together to develop a cost benefit analysis of the PPF's risk mitigation options.

- Pensions Age May 2009

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