Pension Protection Fund Issues 'Onerous Contract' Guidance

Pension trustees in the UK have been reminded of their powers to modify and disclaim onerous contracts.

The Pension Protection Fund (PPF) has issued new guidance explaining the course of action that is open to trustees under section 161 and Schedule 6 of the Pensions Act 2004.

In the new guide, the PPF has proposed "standard wording" to be used for ISDA contracts between counterparties and pension scheme trustees.

Many trustees may be alarmed by the need for the PPF to issue such guidance.

The move could encourage a number of people to take out an additional retirement funding plan such as equity release to ensure a comfortable standard of living in later life.

Such schemes allow homeowners to access funds that may be tied up in their property assets.

A response to the organisation’s latest consultation and further guidance has been published for trustees to access on the PPF’s website.