The Pension Protection Fund should “modernise” its rules so that pension members can obtain advice on transferring out of the scheme to make use of the pension freedoms, Aegon has said.

The suggestion follows the PPF’s recent briefing document, Overview of the Pension Protection Fund, which was added to the House of Commons Library on 30 January. While this provides a description of the PPF, its origins, compensation it pays and how it is funded, it does not mention the fact that once individuals are in the PPF they are unable to access their pensions flexibly via the pension freedoms.

Aegon pensions director Steven Cameron said: “Aegon recognises the valuable protection the PPF offers, but it’s about time it considers modernising its rules so that individuals can seek advice on the pros and cons of transferring out to enjoy a more flexible income in retirement.”

It has been noted that although those in the PPF will receive payments in line with the shape and timing of the scheme pension they would have otherwise received, they are unable to obtain a flexible income and withdraw their pension through the freedom and choice policy.

As a result, Aegon is arguing that now; especially in light of high profile cases like Carillion with members transferring into the PPF; is the right time to modernise the lifeboat.

Cameron added: “The PPF plays an important role in protecting members of inadequately funded defined benefit pension schemes where their employer becomes insolvent. However, one significant downside is that once in the PPF, individuals lose the ability to choose the best way to take their pension.

“There’s currently a huge demand from individuals seeking advice on transferring from defined benefit to defined contribution schemes, and for many, the reason is to access the pension freedoms the government introduced in 2015. As things stand, once in the PPF, individuals lose the ability to transfer to a defined contribution scheme and then to choose to draw their retirement income in a flexible way to match their retirement needs.

“The PPF was designed before these freedoms were introduced and we believe it’s now time to explore how best to modernise the PPF’s approach. This would allow individuals to seek advice on whether transferring out of the PPF into a DC arrangement would be suitable for their circumstances.”

Prior to the collapse of Carillion, over 230,000 pension scheme members had been transferred into the PPF since it was set up. Over 125,000 are already receiving pension income, while 100,000 are still to receive their first payment.

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