PPF seeking rule change on insured liabilities
UK - The Pension Protection Fund is seeking a change in legislation to ease difficulties with insured liabilities and valuations.
"The board of the Pension Protection Fund recognises the difficulties faced by scheme actuaries when completing a valuation in accordance with section 179 and section 143 of the Pensions Act 2004, where schemes do not hold records of historic annuity purchases," the PPF said in a statement late on Friday.
It has approached the Department for Work and Pensions to request legislative change.
"As a result, the Department will be publishing amended valuation regulations to permit scheme actuaries to exclude from section 179 and section 143 valuations annuities bought in the name of the trustees in restricted circumstances," the PPF added.
"The legislation has had Ministerial approval, however it is subject to consultation."
Sections 179 and 143 respectively cover the calculation of the risk-based levy and whether the PPF should take responsibility for a scheme.
Legislation and the Board's supporting guidance currently require all annuities bought in the name of trustees (but not members) to be included in the valuations.
This is because these annuities remain assets of the scheme, and therefore should be included in scheme valuations.
The new regulations will permit scheme actuaries to exclude annuities bought in the name of the trustees in restricted circumstances.
The PPF said: "The board's view is that annuities in the name of the trustees are assets of the scheme, and that best practice is therefore for them to be included in scheme valuations.
"This regulatory change is simply designed to deal with poor historic record-keeping, where it would be either disproportionate or impossible to identify historic annuity purchases."
It expects legislation to come into force in April 2007 in time for the 2007/2008 levy year. The legislation has had Ministerial approval, however it is subject to consultation.