GLOBAL/UK- Schemes with sponsors domiciled outside the European Economic Area (EEA) are at risk of being denied Pension Protection Fund coverage despite paying the levy, a consultant warns.
Roberts said while UK and EEA companies with qualifying pension schemes can petition directly to the PPF if the company goes under and the pension fund is insolvent, this was more problematic with sponsors domiciled outside the EEA.
"If you have a foreign company, it's harder. You need to get an order from a UK court to wind up the assets," he said. He went on to warn that companies ran the risk of the courts denying their claim and leaving employees without the pension benefits promised them.
Roberts said some companies can be paying in the high six figures, some into the seven figures, for a protection they are not guaranteed to get.
To his knowledge, and others, this court system has never been tested.
A department for work and pensions spokeswoman said: "For a defined benefit pension scheme with a sponsoring employer incorporated outside the UK, the overseas company would need to apply for a winding up order from the court."
Roberts said the number of firms this would likely affect is small but the loophole is all the more important now that the economic downturn is hammering solvency levels down while threatening companies' livelihoods.
He added there is a "real danger" foreign companies are not aware of the implications of this loophole.
Punter Southall head of research Jane Beverly said: "You want there to be complete parity between those paying the levy."
PP has compiled a list of what to watch out for over the coming months.
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