R/16
31 July 2009
The Pension Protection Fund (PPF) is responsible for keeping the assumptions used for pension scheme valuations under section 143 and section 179 of the Pensions Act 2004 in line with pricing in the buy-out market.
In light of recent developments in the buy-out market, the PPF is considering – subject to consultation – making some changes to these assumptions, to bring valuation in line with market prices.
The changes may result in fewer schemes entering the PPF because valuations based on the proposed new assumptions may mean they are able to pay benefits greater than PPF levels of compensation.
The PPF plans to introduce these new assumptions from 31 October 2009. The last time the PPF changed these assumptions was in March 2008.
Interested parties who want to contribute to this consultation have until 11 September 2009 to make their submissions.
ends
Notes:
1.The proposed s143 and s179 assumption changes are to:
- Increase the yields used to discount future payments by 0.1 per cent a year in deferment
- Increase the yields used to discount future payments by 0.3 per cent a year in payment
- Change one of the yields used as a reference point to one with a longer duration
- Increase the assumption about future longevity improvements for males by raising the floor to the annual improvements from one per cent to 1.25 per cent, and
- Reduce the proportion of members who are married or who have relevant partners by five per cent.
The PPF proposes to keep all other assumptions unchanged.
The PPF proposes to introduce these changes for valuations from 31 October 2009. This means there will be little impact on PPF levies for 2010/11. The first year in which these new assumptions will have an impact will be 2011/12.
2.Copies of the consultation document, Consultation on Assumptions to be Used for Valuations under Section 143 and Section 179 of the Pensions Act 2004, is available on the PPF website. Closing date for submissions is 11 September 2009.
3.The Pension Protection Fund was set up under the provisions of the Pensions Act 2004 in April 2005 and is classified as a public financial corporation. It has been established to pay compensation to members of eligible defined benefit and hybrid pension schemes when there has been a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.
For further press information contact: Richard Hunt on 0208 633 5931/0789 425 5561 or Ana Moreno on 020 8633 4932/ 07961 957 480