Most Pension Protection Fund Ombudsman (PPFO) referrals involving contingent assets have been firmly rejected.  Unusually, in a recent case involving the NASUWT Managed Pension Plan (the Plan), the Deputy PPFO considered that a decision of the PPF Reconsiderations Committee (PPFRC) was “not reached correctly” and referred it back to the PPF for reconsideration.


PPF compliant contingent assets can reduce (sometimes very significantly) the annual risk based levy payable to the PPF by eligible schemes.  In order for a contingent asset to be recognised by the PPF for levy reduction purposes, various documents must be submitted in accordance with the PPF’s determination and guidance.

In March 2009, the Plan trustees submitted a Type B(ii) contingent asset (a charge over property) which included a valuation of the property in question, a conference centre, and a legal opinion.

Seven months later, the PPF Board wrote to the trustees to say that the Plan had not satisfied the PPF’s requirements for recognition of the contingent asset because: (a) the property had been valued on a market value basis rather than on a vacant possession basis; and (b) qualifications in the legal opinion were inconsistent with the opinion given.  This rejection could have resulted in a significant increase in the Plan’s PPF levy.

The determination

Property valuation

The PPF requires that a Type B(ii) contingent asset certificate must value the property on a vacant possession basis where, broadly, it is occupied by a scheme employer, which the conference centre was.

The PPF and the trustees disagreed as to what a vacant possession valuation meant.  The PPF thought the conference centre valuation of £6.25 million provided by the trustee’s advisers, GVA, was overly generous and not given on a true vacant possession basis.  The trustees contended that a vacant possession valuation was not clearly defined in PPF guidance, had a range of meanings and they considered that their valuation was reasonable in the circumstances.

The PPFO said the PPF guidance notes were unclear as to what vacant possession meant and if the PPF wanted the valuation to be carried out in a certain way they should have said so.  The PPFO said that, in rejecting the appeal, the PPFRC had not “asked the right questions” or “considered only relevant and not irrelevant factors”.

Legal opinion

The PPF requires that Type B(ii) contingent assets are accompanied by a legal opinion which confirms, among other things, that the security agreement creates a first legal charge or mortgage over the property in favour of the trustees.

In this case, the legal opinion correctly provided this confirmation but, elsewhere,  contained various qualifications. The PPF said the qualifications undermined and nullified the opinion.  The trustees said these were merely “irrelevant boilerplate” that did not affect the confirmation given.

The PPFO considered that: (a) the Board was really only raising this as an issue because of the disagreement over the valuation; and (b) this point alone would not have resulted in the contingent asset not being recognised.


This case is a reminder that the PPF tends to take an unwavering stance when it comes to interpreting its own determinations and guidance (and that great care should be taken when submitting PPF contingent asset documentation).  However, it also shows that trustees’ referrals to the PPFO may sometimes, albeit rarely, succeed.    Our experience reflects this.  In particular, where the numbers at stake are large, it is always worth looking closely at whether the determination can be challenged.

The case deals with quite specific points relating to property PPF contingent asset, not the inaccurate information or missed PPF deadlines that more commonly form the subject matter of PPF appeals.  However, it will be of particular interest to those who have submitted or plan to submit a property valuation to the PPF.  We understand that, as a result of this case, the PPF plans to clarify its guidance on valuations.

The case has now been referred back to the PPF for reconsideration.