What Happens to My Pension If My Employer Is Insolvent?

Who this guide is for

Anyone in the UK whose employer, or former employer, has become insolvent (gone bust) and who wants to know what happens to their workplace pension. It covers final salary and career average pensions (defined benefit) and the Pension Protection Fund, pension pots (defined contribution), and pension money taken from your pay but never paid in. The Pension Protection Fund covers the whole UK. The rules here are the same in England, Wales, Scotland and Northern Ireland except where a line says otherwise.

What this guide does not cover

• Redundancy pay, unpaid wages, notice pay and holiday pay when your employer goes bust: use the employer insolvency checker.
• Opting out of a workplace pension, who must be enrolled and how much must be paid in: read Can I Opt Out of My Workplace Pension? or use the workplace pension checker. For Nest, read Can I Opt Out of My NEST Pension?
• What protects a public sector pension. This guide does not cover it: ask your scheme or MoneyHelper.
• A pension provider or insurer that fails, rather than your employer. The PPF does not cover this, and this guide does not cover it: ask MoneyHelper.
• How much the Financial Assistance Scheme pays, transfers out of a scheme, pension scams, tax, pensions on divorce and the State Pension. This guide does not cover them: ask the PPF, FAS or MoneyHelper.
• Challenging a PPF decision about your own compensation. This guide does not cover it: ask the PPF or The Pensions Ombudsman.

The questions that decide the answer

1. What kind of pension is it? A defined benefit pension (final salary or career average) pays an amount worked out from your pay and years in the scheme: the PPF may step in. A defined contribution pension is a pot of money: the PPF does not cover it, and the question is whether all the money due was paid in.
2. Has your employer become insolvent, and have the trustees said the scheme is in a PPF assessment period? If not, the PPF is not involved.
3. On the date the assessment period started, had you reached your scheme's normal pension age, or were you getting an ill-health or survivor's pension? If yes, 100%. If no, 90%.
4. For missing contributions: were they due in the 12 months before the insolvency? If yes, they can be claimed from the National Insurance Fund. If older, they are a debt owed by the insolvent employer.
5. Is it a public sector scheme, or did the scheme start to wind up between 1 January 1997 and 5 April 2005? Public sector schemes are not covered by the PPF. Schemes that started to wind up in those years may be covered by the Financial Assistance Scheme instead.

"Is my pension protected by the PPF?"

The PPF protects members of eligible defined benefit schemes across the UK, including the defined benefit part of a hybrid scheme.

It does not protect defined contribution pensions or public sector pension schemes.

Other schemes it does not protect include schemes with a Crown guarantee, schemes that are not tax registered, schemes that only pay death in service benefits and schemes with fewer than two members.

Even in a protected scheme, the PPF says you are usually not protected if you left the scheme before 6 April 1975; before 1 January 1986 when you were under 26; before 6 April 1988 after paying in for less than 5 years; or after 6 April 1988 after paying in for less than 2 years. In those cases a refund of your contributions was likely paid to you.

"My employer has gone bust. What happens to my final salary pension?"

The PPF only takes over a defined benefit scheme when the employer has become insolvent, the scheme cannot be rescued, and the scheme does not have enough money to pay at least what the PPF would pay.

The assessment period usually starts as soon as the employer becomes insolvent. During it the PPF checks whether the scheme can be rescued or can pay at least PPF levels.

A scheme does not go into the PPF if a new employer takes it on, if it moves to a pensions consolidator, or if it has enough money to buy benefits from an insurer at PPF levels or higher. If the scheme can pay you more than the PPF would, that is what you get.

"What happens during the assessment period?"

Your scheme's trustees stay in charge of the scheme during the assessment period and keep paying pensions that are already being paid.

If you have reached normal pension age, your pension generally carries on as normal. Payments during the assessment period should be kept to PPF levels, and the PPF may adjust them later if they were not.

If you have not reached normal pension age, you may be able to retire early during the assessment period if your scheme allows it. Your pension is reduced because it is paid for longer.

Your trustees can tell you what you might get from the PPF. By the end of the assessment period they tell you whether the scheme has enough money to pay more than the PPF would.

"How much will the PPF pay me?"

If you had reached your scheme's normal pension age on the date the assessment period started, the PPF generally pays 100% of the pension you were getting from the scheme.

The PPF also generally pays 100% if you were getting an ill-health pension, whatever your age, or a survivor's pension paid because someone had died.

If you had not reached your scheme's normal pension age on the date the assessment period started, the PPF pays 90%, and it stays at 90% when you reach that age. This applies whether you had not yet retired or had retired early for reasons other than ill health.

The Court of Appeal ruled in 2021 (the Hughes case) that the PPF compensation cap was unlawful age discrimination, and the PPF has removed it.

Every member must get at least 50% of the value of the pension they built up in the scheme. This comes from the Hampshire ruling, and the PPF increases payments where needed to meet it.

You can usually take your compensation at a reduced rate before your scheme's normal pension age, or put it off until later. You can usually give up some of your pension for a lump sum when you retire.

This guide does not work out your own amount: your trustees, or the PPF once your scheme has transferred, can tell you.

"Will my PPF payments go up each year?"

The PPF applies increases each January. Payments for pension built up from 6 April 1997 generally go up in line with inflation, by no more than 2.5% a year. These increases may be different from the ones your scheme paid.

Payments for pension built up before 6 April 1997 have not gone up. The Pension Schemes Act 2026 lets the PPF pay increases of up to 2.5% a year on that part too, but only where your former scheme's rules gave those increases as a right.

The earliest the PPF can start paying these pre-1997 increases is January 2027. They are paid from then on, not backdated. The PPF is writing to the members who will get them, so you do not need to contact it.

"I have a pension pot, not a final salary pension"

A defined contribution pension is a pot of money, and the amount you get depends on what was paid in and how the investments did. The PPF does not cover it.

The risk when your employer goes bust is money taken from your pay, or money your employer should have paid itself, that never reached your pot. Check your pension statements or online account to see what was paid in.

"My employer took pension money from my pay but did not pay it in"

If your employer is legally insolvent, unpaid pension contributions can be claimed from the National Insurance Fund. This applies to occupational and personal pension schemes, including pension pots.

The claim covers contributions deducted from your pay but not paid in during the 12 months before your employer became insolvent.

It can also cover contributions your employer should have paid itself for those 12 months, up to the lowest of: the amount unpaid, an amount certified by an actuary, and 10% of the pay of the workers concerned for those 12 months.

Older unpaid contributions cannot be claimed from the National Insurance Fund: you and the other members become creditors of the insolvent employer for them.

You cannot claim unpaid pension contributions from the National Insurance Fund yourself: the people who run your scheme, such as the trustees or scheme administrator, make the claim with the insolvency practitioner.

Contact the insolvency practitioner, or the official receiver, to check the claim is being made.

In England, Wales and Scotland the claim is paid by the Redundancy Payments Service under section 124 of the Pension Schemes Act 1993.

"Our scheme started winding up years ago"

The Financial Assistance Scheme (FAS) helps members of underfunded defined benefit schemes that started to wind up between 1 January 1997 and 5 April 2005, where the employer cannot pay the shortfall. The PPF runs FAS for the government.

FAS has been closed to new applications from schemes since 1 September 2016.

Northern Ireland

The PPF covers Northern Ireland schemes in the same way, under the Pensions (Northern Ireland) Order 2005.

In Northern Ireland, claims for unpaid pension contributions are paid by the Department for the Economy from the National Insurance Fund. The scheme's trustees or administrators apply on form RP15, which is on nidirect.

Deadlines you must meet

• During the assessment period your questions go to your scheme's trustees: the PPF only holds your details once your scheme has transferred to it.
• Missing contributions: only the 12-month period above can be claimed from the National Insurance Fund, so contact the insolvency practitioner or official receiver soon.
• Complaints to The Pensions Ombudsman: this guide does not cover the time limit: ask The Pensions Ombudsman.

Traps

• The PPF does not cover a pension pot such as Nest. What matters there is whether all the money was paid in.
• If you get 90%, it does not rise to 100% when you reach your scheme's normal pension age.
• Anyone saying a cap limits PPF compensation is out of date.
• Nobody claims missing contributions unless the scheme does: check with the insolvency practitioner rather than waiting.
• Pre-1997 increases are not for everyone: only where the old scheme rules gave them, and not before January 2027.
• A public sector pension is not a PPF matter.
• The PPF and FAS are different: FAS is for schemes that started to wind up between 1997 and April 2005.