Trustee Guidance: Fraud Compensation
Introduction
The Fraud Compensation Fund was established under the Pensions Act 2004 to provide compensation to occupational pension schemes suffering financial losses that can be attributable to dishonesty. The Fraud Compensation Fund became operational on 1 September 2005 and replaces the Pensions Compensation Board. The Fraud Compensation Fund is operated by the Board of the Pension Protection Fund (“the Board”). It applies to most defined benefit and defined contribution pension schemes.
During an assessment period trustees should consider whether an application for compensation from the Fraud Compensation Fund should be made. Trustees should also note that any compensation paid from the Fraud Compensation Fund will need to be included in the section 143 actuarial valuation. The section 143 actuarial valuation can not be completed until an application to the Fraud Compensation Fund has been considered and, if necessary, settled.
Objectives
To make an application to the Fraud Compensation Fund, where required, in the appropriate manner.
To ensure the application is dealt with effectively, efficiently and decisions can be made within legislative requirements.
Key Activities for Trustees
Consider whether an application for compensation from the Fraud Compensation Fund should be made – see website guidance.
Make an application to the Board where it is considered appropriate by completion of the application form provided.
Following an application, consider whether an interim payment is required and, if so, approach the Board.
Provide evidence in relation to the losses that can assist the Board in reaching a conclusion.
Key Activities for the Pension Protection Fund
Consider the application and whether it meets legislative requirements.
Gather necessary evidence from Trustees or managers – and other third parties if necessary.
Keep applicant informed of the application’s progress.
Inform Trustee of decision and make payments when appropriate.
Created May 2006
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