What happens to my pension if my employer goes bust?

If a company becomes insolvent, a specialist accountant called an 'insolvency practitioner' takes over its affairs. They will appoint an independent trustee to take over the pension fund from the trustees.

If, as is very likely, the pension fund cannot meet its current and future liabilities the new Pensions Protection Fund will step in and ensure that pensions can still be paid.

The Pensions Protection Fund (PPF) came about from a long union campaign to provide protection for employees who were losing their pension through no fault of their own when their employer went bust.

It is a kind of insurance scheme. All occupational pension schemes that pay a salary related pension have to pay a levy. In return their members are protected if they go bust.

If you are already receiving a pension then the PPF will carry on paying you the same pension that you currently receive. The part of your pension that you built up after April 1997 will increase in future years in line with prices up to a maximum of 2.5 per cent. This may be less than the increases you would have got from your old scheme.

If you are yet to receive your pension the PPF will pay up to 90 per cent of what you would have got if your pension scheme had not gone bust, up to a maximum pension of £25,000 a year at 65.

But winding up a pensions scheme is a difficult and time consuming process. You can find out about the process at the OPAS website.

You can find out more about the Pensions Protection Fund at its website.