The trustees of the staff pension fund of a wholly Government-owned company have failed to convince the High Court that they do not have to pay the usual levy to the Pension Protection Fund (PPF) on the basis that the funds that they administered were already backed by a Home Office guarantee.

The Forensic Science Service Limited had ceased active operations in March 2012 after running into financial difficulties. The Home Office subsequently guaranteed that it would meet any deficiencies in the staff pension fund. In those circumstances, it was submitted that the backing provided by the PPF was wholly unnecessary and that the levy was thus not payable.

The trustees argued that the fund was not an ‘eligible scheme’ within the meaning of Section 126 of the Pensions Act 2004 in that, by operation of the Pension Protection Fund (Entry Rules) Regulations 2005, pension funds the assets of which are secured by relevant public authorities do not fall under the aegis of the PPF.

In dismissing those arguments, however, the Court noted that the Home Office guarantee was not without qualification and could be withdrawn in certain circumstances, including if the trustees engaged in ‘unethical’ investment strategies or bought shares in companies with ‘poor environmental records’.

The limits to the guarantee were fatal to the trustees’ arguments and the fund was therefore an ‘eligible scheme’ in respect of which the levy was payable. However, the Court noted that that position might well be changed were the Home Secretary to see fit to give an unqualified guarantee in respect of the scheme’s liabilities.