The Pensions Regulator

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Scheme return: DB specific FAQs

We don't understand what financial information about our scheme we need to supply

Should we base our response to the FRS17/IAS19 liabilities question on the scheme's principal employer?

What are the different types of multi-employer schemes?

What does the term 'weighted' mean regarding the average age of scheme members?

Why are we asking these questions about life expectancy?

What does period life expectancy and cohort life expectancy mean?

Surely these questions are only for round 2 valuations with effective dates on or after 22 September 2008.  Why are you asking them in the current scheme return?

What is it that you are looking for?

What information is being collected in respect of GMPs?

Why is this information needed?

Where a scheme has more than one NPA, what figure should be input on the scheme return?

 

We don't understand what financial information about our scheme we need to supply

If your scheme is defined benefit in nature, you'll need to have the following to hand:

• Market value assets. These can be found in your annual scheme accounts and are held by the scheme's trustee on behalf of its members. The scheme's most recent actuarial valuation is required when completing both the minimum funding requirement (MFR) and the section 179 related questions.
• A buy out valuation is a breakdown which determines how a scheme's trustee has insured a scheme member's liabilities and annuities in either the individual member's name, or in the name of the trustee on behalf of that member, when reaching the end of pensionable service within that scheme in lieu of entitlement from the main benefit structure of the scheme.

If your scheme is defined contribution in nature you'll need to have the following to hand:

• The scheme's most recent auditor's statement of contributions. This will be a major source of information in completing the scheme return.
• Market value assets. These are all assets held by the scheme and should be documented in the scheme annual accounts.

Should we base our response to the FRS17/IAS19 liabilities question on the scheme's principal employer?

Yes, your response to this question should be based on the scheme's principal employer's calculations. Please note, FRS17 liabilities can be found in the sponsoring employer's latest published accounts.

What are the different types of multi-employer schemes?

There are two broad types of multi-employer schemes: non-segregated schemes and segregated/sectionalised schemes.

There are three categories of non-segregated multi-employer schemes identified in paragraphs 74 and 75 of the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 or Regulations 74 and 75 of the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations (Northern Ireland) 2005.

These categories are:

• non-segregated schemes with a requirement to segregate on cessation of participation of an employer;
• non-segregated schemes with discretion to segregate on cessation of participation of an employer; and
• non-segregated schemes with neither a requirement nor discretion to segregate on cessation of participation of an employer.

There are similarly also three categories of multi-employer sections of a segregated scheme.

What does the term 'weighted' mean regarding the average age of scheme members?

Defined benefit schemes should take into consideration the emphasis placed on the breakdown of their membership that the MFR liabilities or section 179 lean towards. So 'weighted' labels the importance of liabilities associated with the members and the categories they fall into (active, deferred or pensioner).

Why are we asking these questions about life expectancy?

See our mortality consultation report paragraph 3.21.

What does period life expectancy and cohort life expectancy mean?

See explanation for more information.

"Period @ 65 - this is the expected age at death for a 65-year-old if post valuation date improvements are assumed to be zero."

"Cohort @ 65 - this is the expected age at death for a 65-year-old pensioner at valdate allowing for future improvements."

"Cohort @ 45 - this is the expected age at death for a 65-year-old pensioner on retirement 20 years after valdate allowing for future improvements."

Surely these questions are only for round 2 valuations with effective dates on or after 22 September 2008. Why are you asking them in the current scheme return?

We think it is of value to build up our database on these assumptions sooner rather than later, so that the first round 2 valuations can be considered in context. We believe that the information is readily available for most schemes without additional work; we understand that some schemes will find this difficult to complete and will not do so.

What is it that you are looking for?

It is the cohort expectancy implied by the tables used - it doesn't matter whether the tables used are C= or U= or involve the cohort adjustments.

Example 1: If PMA92 tables with year of birth and long cohort is adopted for both current and future pensioners

Formally this is PMA92lc(U=2008)

Period life expectancy for a 65-year-old now

= life expectancy for a 65-year-old using the 92 tables with long cohort projections to CY 2008  = 86.0

Cohort life expectancy for a 65-year-old now

= life expectancy for a 65-year-old using the 92 tables year of birth=1943 with long cohort = 88.7

Cohort life expectancy at 65 for a 45-year-old now

= life expectancy for a 65-year-old using the 92 tables year of birth=1963 with long cohort = 89.8

Example 2:  Where current pensioner assumption is PMA92 long cohort to CY 2020, where future pensioner assumption is PMA92 long cohort to CY 2030

Formally this is PMA92lc(C=2020/2030)

Period life expectancy for a 65-year-old now is unknown if no decision has been made on split between base and improvement. We expect that most will regard their approach as an approximation to 92lc YoB and hence put in 86.0

Cohort life expectancy for a 65-year-old now

= life expectancy for a 65-year-old using the 92 tables long cohort projections to 2020 = 88.3

Cohort life expectancy at 65 for a 45-year-old now

=life expectancy for a 65-year-old using the 92 tables long cohort projections to 2030 = 89.2.

What information is being collected in respect of GMPs?

Do the scheme liabilities include guaranteed minimum pensions? Yes or no
If scheme liabilities include GMPs, have the overall benefits been equalised to allow for the difference in GMP between men and women? Yes or no
How was equalisation achieved? (Please describe briefly):
Date equalised (dd/mm/yyyy)

Why is this information needed?

In April 2008 the PPF issued a consultation document on the requirement to equalise compensation to allow for differences in the guaranteed minimum pension (GMP) formula between men and women. Although the consultation has now closed, no decision has yet been taken on how (if at all) compensation will be equalised to allow for GMP.

Therefore the impact on s179 valuation methodology and ultimately the calculation of the Pension Protection Levy is currently unknown. The scheme return data now being collected will be used for the calculation of the Pension Protection Levy for 2010/11.

These general questions regarding GMP have been included in the scheme return as we need to ensure that we have sufficient data to calculate schemes' levies allowing for the position on GMP should this be required.

Where a scheme has more than one NPA, what figure should be input on the scheme return?

Where more than one NPA applies, we would like schemes to input the age that applies to the largest proportion of (ideally s179) liabilities. For example. if a scheme's NPA was 65 for males and 60 for females prior to 1990, equalised at 60 between 1990 and 1995 and 65 thereafter, in general, the majority of pre- 97 liabilities would related to NPA 65. However, if the scheme had a large proportion of members with the majority of their service between 1990 and 1995, or a significant number of females with pre 1990 benefits payable from 60, then an NPA of 60 may apply to the majority of liabilities.