Commentary on Sections Summary Entitlement to fraud compensation Section 187: Board’s powers to make fraud compensation transfer payments
681.Where the Board assumes responsibility for a scheme, the Board may make fraud compensation transfer payments to the Pension Protection Fund. This will occur where there had been a reduction in the scheme’s assets after the relevant date (as defined by section 182 (10)) but before the transfer notice was received by the trustees or managers under section 160 (transfer notices), ending the assessment period and confirming that the Board of the Pension Protection Fund will assume responsibility for the scheme, section 182(1)(b) applies and no application had been made for fraud compensation prior to the Board assuming responsibility for the scheme.
682.Under subsections (3) and (4), the Board is required to attempt to recover the value of the loss (‘recovery of value’), where the recovery can be made without undue cost or delay. The trustees’ or managers’ rights of recovery will have been transferred to the Board when it assumed responsibility for the scheme. The transfer payment cannot be made until all reasonable attempts have been made to recover the loss. A transfer cannot be made until the Board considers it is unlikely to recover anything further without undue cost and delay.
683.Subsection (5) provides that “recovery of value” means any increase in the value of the Pension Protection Fund as a result of payment received by the Board that is attributable to the offence that caused the reduction in value.
684.Subsection (6) provides that it is for the Board to decide whether a payment it receives is a recovery of value.
685.Subsection (7) provides that the amount of fraud compensation transfer payment must not exceed the difference between the reduction in value and any subsequent recoveries.
686.Subsection (8) provides that regulations will set out how the Board is to determine the amount of any fraud compensation transfer payment.
687.Subsection (9) clarifies that “the relevant date” has the same meaning as in section 182(10). This means that fraud compensation will only be paid in the case of an occupational pension scheme which is established under trust, if the value was reduced after 6 April 1997 and in the case of a scheme which is not established under trust, if the value was reduced after the date specified by an order under section 182(10).