Commentary on Sections Summary The fund Section 173: Pension Protection Fund
637.The Pension Protection Fund is a fund maintained by the Board, and is designed to ensure that income derived from the Pension Protection levies (including the initial levy), and assets transferred from schemes to the Board under section 161 are kept separate from other assets and monies such as those held in the Fraud Compensation Fund or those relating to the administration of the Board.
638.The Pension Protection Fund comprises of:
	property and rights transferred from schemes to the Board under section 161(2)(a);
	receipts from the initial levy (under section 167) or the pension protection levies (under section 175);
	money borrowed under section 115 for the purposes of Chapter 3 of Part 2 (pension protection);
	investment income or capital gain arising from the assets in the Pension Protection Fund (see subsection (2));
	any repayment of a loan which has been made to trustees or managers during the assessment period so that they can pay scheme benefits which the scheme was unable to pay during the assessment period, and any interest repaid on the loan (see section 139);
	amounts recovered by the Board after a scheme has entered the Pension Protection Fund because the trustees had overpaid an individual during the assessment period (section 163(4)(a)) or because the Board overpaid an individual following entry (seesection 168(2)(e));
	any amount which is paid in order to meet a debt owed under section 40(7) because a contribution notice has been issued by the Regulator under section 38. For example, under section 38, the Regulator may issue contribution notices where there is evidence that employers have attempted to prevent the recovery of or, avoid or otherwise than in good faith, reduce their liability for the “employer debt” that has or might become due under section 75 of the Pensions Act 1995 (deficiencies of assets);
	any property transferred or amounts paid to the Board as required by a restoration order issued by the Regulator under section 52. A restoration order may be issued by the Regulator in order to restore the position of a pension scheme and to protect the Pension Protection Fund against the effect of transactions at an undervalue involving scheme assets;
	any amount paid to the Board because the Regulator has issued a contribution notice where there has been a failure to comply with a restoration order under section 55;
	any amounts transferred from the Fraud Compensation Fund (as set out in section 187);
	additional categories of money required to be paid into the Pension Protection Fund by secondary legislation under subsection (1)(k). However, the secondary legislation cannot allow money to be paid into Pension Protection Fund directly or indirectly from the Crown.
639.Subsection (2) states that the Board must credit to the Pension Protection Fund any income or capital gain which arises from the assets held in the fund.
640.Subsections (3) and (4) provide that only the following payments and transfers may be made from the Pension Protection Fund:
	sums required to pay any liabilities of schemes for which the Board assumes responsibility (as set out in section 161(2)(a));
	payments of pension compensation to individuals under Chapter 3 of Part 2;
	money required for the repayment of, and the payment of interest on, funds borrowed by the Board as described under subsection (1)(c). (There is further detail on borrowing under section 115);
	money required to make loans to trustees or managers unable to meet liabilities for pensions and benefits requiring immediate payments as set out under section 139;
	money required to make payments to individuals who were underpaid during the assessment period;
	money required to make payment of scheme benefits to individuals who were due to receive these payments before the assessment date (the beginning of the assessment period), but who remain unpaid at the point the Board assumes responsibility for the scheme (as set out in section 166);
	sums required to discharge liabilities under sections 169 or 170 – for example, the purchase of annuities to cover money purchase benefits under a hybrid scheme, or the payment of scheme benefits outstanding at the point of entry to the Pension Protection Fund;
	any sums required to meet liabilities imposed on the Board by a restoration order where transactions at an undervalue have occurred (section 52);
	any property (other than sums of money) required to meet liabilities imposed on the Board by a restoration order where it has assumed responsibility for a scheme;
	sums required to meet the cost of transferring foreign property, rights and liabilities from the scheme to the Pension Protection Fund (as set out in section 161(5), and paragraph 7 of Schedule 6);
	sums required for purposes prescribed by regulations.