Chapter 1 – The Board
Establishment
Sections 107, 108 and 109: The Board of the Pension Protection Fund; Membership of the Board, Further provision about the Board
336.A body corporate known as the Board of the Pension Protection Fund is established by section 107.
337.The Board is to consist of a chairman appointed by the Secretary of State; a Chief Executive appointed by the Board with the approval of the Secretary of State (although the first Chief Executive will be appointed by the Secretary of State); and at least five ordinary members appointed by the Board, at least two of which must be appointed from the staff of the Board. A maximum number of ordinary Board members may be prescribed by secondary legislation.
338.The executive members of the Board are the Chief Executive and the two or more members appointed from the staff of the Board. All other members of the Board, including the chairman, will be “non-executive members” and a majority of the Board must be non-executive members.
339.Further provision about the Board is set out in Schedule 5.
Schedule 5: The Board of the Pension Protection Fund
340.Part 1 of Schedule 5 deals with the membership of the Board.
341.The ordinary Board members who are non-executive members are the members who are not also members of the Board’s staff. The ordinary members who are executive members are members who are also members of the Board’s staff (see section 108(7)(membership of the Board))
342.Paragraph 1 provides that the chairman of the Board is to be appointed by the Secretary of State. Paragraph 2 provides that the first five appointments of ordinary members (all members other than the Chairman and the Chief Executive) will also be made by the Secretary of State, while subsequent appointments will be made by the Board in accordance with any procedure that may be set out in regulations. There must always be at least five ordinary members and should there be less at any time the Secretary of State must appoint the additional members required.
343.Paragraph 3 provides that the terms and conditions of appointment of the Chairman and the ordinary members will be decided by the Secretary of State where he has appointed him. The terms and conditions of a Chairman appointed by the Board will be decided by it. Paragraph 3 further states that the terms and conditions of non-executive Board members will be set by the Chairman with the approval of the Secretary of State, while the Chief Executive will set the terms and conditions of the executive members of the Board.
344.The terms and conditions of ordinary members who are non-executive members will be decided by the Chairman with the approval of the Secretary of State. The Chief Executive will decide the terms and conditions of the ordinary members who are executive members of the Board.
345.The terms and conditions of appointment underParagraphs 4, 5 and 6 will govern how long members stay in office, their leave, how they resign etc. However a person will cease to be a member of the Board if:
in the case of the chairman he ceases to hold this position or if he becomes a member of staff of the Board;
in the case of any other non-executive member he becomes a member of the staff of the Board;
in the case of an ordinary executive member he ceases to be a member of the staff of the Board;
in the case of the Chief Executive he ceases to be employed as such.
346.Paragraphs 7-9 deal with remuneration. The Secretary of State determines the remuneration of the non-executive members of the Board. The Board can pay (as determined by the Secretary of State) this remuneration and can make provision for its payment. This includes allowances, gratuities or pensions.
347.The table below summarises the appointment procedures for the Board and its staff.
| Initial appointment by | Subsequent appointments by | Terms and conditions set by | Remuneration set by | |
|---|---|---|---|---|
| Chairman | Secretary of State | Secretary of State | Secretary of State | Secretary of State |
| Chief Executive | Secretary of State | Board, with the approval of the Secretary of State | Secretary of State | Secretary of State for the first appointment; |
| Subsequent appointments - the Board, through the committee responsible for the non-executive functions and with the approval of the Secretary of State | ||||
| Non-executive Board members (other than Chairman) | Secretary of State | Board | Secretary of State for first appointment; | Secretary of State |
| Subsequent appointments - Chairman with the approval of the Secretary of State | ||||
| Executive Board members (other than Chief Executive and other employees) | Secretary of State | Board | Secretary of State for first appointment; | Board, with the approval of the Secretary of State |
| Chief Executive | ||||
| Other staff of the Board | Board with Secretary of State approval as to numbers | Board with Secretary of State approval as to numbers | Chief Executive | Chief Executive |
348.Part 2 of this Schedule sets out the detailed provisions on the staff of the Board.
349.Paragraph 11 sets out that the staff of the Board consists of the Chief Executive, the other employees of the Board and any additional staff made available by the Secretary of State. Additional staff could include, for example, those on secondment from the Department for Work and Pensions.
350.The first Chief Executive will be appointed by the Secretary of State, who will also set the terms and conditions and remuneration. Subsequent appointments of the Chief Executive will be made by the Board who will also set the terms and conditions of these appointments. The Secretary of State must approve them. However, a committee established to exercise the non-executive functions under section 112(non-executive functions) will make recommendations on remuneration for the Chief Executive.
351.Other employees will be appointed by the Board with the Secretary of State’s approval. The Chief Executive will determine the terms and conditions although in the case of an employee who is also to be an executive member or prescribed descriptions of employees the terms and conditions relating to remuneration will be determined on the Board’s behalf by the committee established to exercise the non-executive functions (and with the Secretary of State’s approval in the case of executive members).
352.Any additional staff made available to the Board will be on such terms as to payment as the Secretary of State may determine.
353.Part 3 of Schedule 5 covers proceedings and delegation.
354.Paragraph 15 enables the Board to establish a committee for any purpose. Any committee established by the Board may further establish sub-committees. The members of such committees or sub-committees (other than the committee or sub-committee mentioned in section 112) can include people who are not members of the Board or members of the committee.
355.The Board will be responsible for setting procedures (and quorum) for itself, it committees and sub-committees.
356.Paragraph 17 enables the Board to delegate any of its functions other than the non-executive functions described in section 112.
357.Paragraph 18 gives the Board the power to outsource some of its functions. These are listed in sub-paragraph (2).
358.Part 4 of the Schedule covers the accounting requirements and authorises the Board to pay certain expenses.
359.Paragraph 22 requires the Board to keep accounts and accounting records following any accounting directions given by the Secretary of State (with approval of Treasury). The Board must prepare an annual statement of accounts, which will include an actuarial valuation of the assets and liabilities of the Pension Compensation Fund. This actuarial valuation must be prepared by the a person appointed by the Board who meets the requirements specified in sub-paragraph (4)(a). A copy of the annual accounts must be sent to the Secretary of State and the Comptroller and Auditor General. In turn, the Comptroller and Auditor General must examine, certify and report on the accounts, and lay both the accounts and his report before both Houses of Parliament.
360.Paragraph 23 enables the Board to pay certain expenses, such as travel allowances. This includes the power to pay fees to persons providing professional advice.
361.Part 5 deals with the status and liability of the Board.
362.By virtue of paragraph 24 the Board is to be regarded as independent from the Crown. Therefore, the property of the Board is not property of the Crown (and the Crown will not be liable to meet any of the liabilities of the Board).
363.Paragraph 25 provides that Board vacancies, or any problems arising out of appointments of members of the Board, committees, sub-committees or the Chief Executive will not affect the validity of any proceedings of the Board.
364.Paragraphs 26 and 27 amend the appropriate legislation to disqualify members of the Board from membership of the House of Commons or Northern Ireland Assembly.
365.Paragraph 28 amends the Superannuation Act 1972 so that the Chairman and the staff of the Board will be eligible for a government-backed pension for which the Board must pay the Minister for the Civil Service such sums as he may direct. This is a common provision for public bodies – for example the Regulator also has a similar provision, as did its predecessor Opra.
366.Paragraph 29 sets out that no member of any Board, committee, sub-committee or staff is to be liable for damages for anything done or omitted in the discharge of the functions of the Board. Members of the committee which exercises the non-executive functions (section 112) will also not be liable for damages when exercising their functions. This does not apply if the action or omission was in bad faith and does not prevent the Board being required to pay compensation on a direction of the PPF Ombudsman or in respect of an act or omission on the grounds that it was unlawful as a result of the Human Rights Act 1998.
General provision about functions
Section 110: Board’s functions
367.The functions of the Board are to hold and manage the Pension Protection Fund and the Fraud Compensation Fund; to levy contributions to those funds, and to carry out other functions as set out in this Act or other enactments.
Section 111: Supplementary powers
368.The Board may do anything which is designed to help it carry out its functions, or which is incidental to those functions. This power enables the Board to carry out all the minor and incidental administrative functions that are necessary for any public body, such as leasing office space and printing stationery.
Non-Executive functions
Section 112: Non-Executive functions
369.This section sets out the non-executive functions. These are reviewing the adequacy of the internal financial controls; determining the remuneration of the Chief Executive and other executive members of the Board (subject to the approval of the Secretary of State); and making recommendations on the remuneration of certain senior staff, identified in secondary legislation.
370.Under this section, the Board is required to establish a committee to discharge the non-executive functions. An executive member of the Board cannot be a member of that committee.
371.The committee must produce a report on the manner in which it has fulfilled its role, which will be included in the Board’s annual report (section 119) (annual reports to the Secretary of State).
372.Any sub-committee to which the committee delegates its functions can include persons who are not members of the committee but cannot include executive members or other staff of the Board. Such sub-committees can discharge any of the committee’s non-executive functions or its duty to prepare the report for inclusion in the Board’s annual report
Financial matters
Section 113: Investment of funds
373.The Board is permitted to invest its funds for the purposes of the prudent management of its financial affairs. When making investment decisions in relation to the Pension Protection Fund, the Board must have regard to both the interests of current and potential beneficiaries of compensation from the Pension Protection Fund, the effect of its decisions on the rate for the levy and the interests of persons affected by the rate (such as the employers). When making decisions in relation to the Fraud Compensation Fund, the Board must have regard to the interests of members of occupational pension schemes and to the effect of its decisions on the rate of the levy and the interests of persons affected by the rate.
374.For the purposes of ensuring the prudent management of the Pension Protection Fund, the Board must appoint at least two fund managers to manage its investments. It must be satisfied that a fund manager has the appropriate knowledge and experience for managing the Pension Protection Fund, or if a firm is appointed has the necessary arrangements in place to ensure that any individual acting on its behalf has appropriate knowledge or experience.
Section 114: Investment principles
375.The Board must produce a written statement of its investment principles that is maintained and reviewed at prescribed intervals. The statement is to set out the investment principles governing decisions about investments made by and on behalf of the Board.
Section 115: Borrowing
376.This section enables the Board to borrow money subject to a prescribed limit (“the borrowing limit”) which will be specified by the Secretary of State by order. The Board is permitted to borrow money from a “deposit-taker” (the meaning of which is set out in subsections (3) and (4)). This section also enables the Board to provide security for any money it borrows.
Section 116: Grants
377.This provision allows the Secretary of State to pay the Board grants towards its administrative expenses. Such money can be used solely for this purpose and cannot be used for the payment of compensation from either the Pension Protection Fund (section 173) or the Fraud Compensation Fund (section 188).
Section 117: Administration levy
378.This section enables regulations to provide for a levy to reimburse the secretary of State’s expenditure under section 116 and his expenditure on the Board’s set-up costs. This levy is in respect of schemes whose members are eligible for pension compensation (as defined under section 162). It is known as the “administration levy”. Regulations will set out how much must be paid and how often it will be paid. This levy will be payable by or on behalf of the trustees or managers of an eligible scheme or any other person as detailed in regulations. The administration levy is payable to the Secretary of State and is recoverable by him or by the Regulator on his behalf. Subsection (4) states that the Secretary of State must consult the Board before determining the rate of the administration levy. The details of how this levy is to be calculated, collected and recovered will be set out in secondary legislation.
Section 118: Fees
379.This section enables regulations to authorise the Board to charge fees specified by regulations or fees sufficient to meet costs specified in regulations.
Annual reports
Section 119: Annual reports to Secretary of State
380.The Board must produce an annual report (for each “financial year” as defined in subsection (6)) dealing with its activities during the reporting period. This includes the report prepared by the committee which exercises the non-executive functions (see section 112(5). This report must be sent by the Board to the Secretary of State as soon as practicable after the end of the reporting period. The Secretary of State must then lay a copy of each report received by him before both Houses of Parliament.