The Pensions Regulator

Regulator listens on longevity

Ref: PN08-15
21 July 2008

The Pensions Regulator today announced that, having listened to responses to its longevity consultation, it has decided to delay the introduction of changes to the way longevity is treated in the scheme funding regime.

Changes will not now apply until the beginning of the next defined benefit scheme valuation cycle starting in September 2008. This will impact valuations, and follow-up recovery plans that must be submitted to the regulator by schemes in deficit, due from December 2009.

The regulator issued a consultation in February this year seeking views on how it expects pension schemes to take account of future improvements on longevity. This had suggested introducing changes applying to valuations due from March 2007.

Commenting on the change, David Norgrove, chairman of the regulator, said:

“The consultation has proved to be extremely useful. In order to ensure that we have the time to fully consider all of the responses, and to clarify that the original proposed date of introduction did not mean that schemes needed to restart valuation processes that had already begun, we have decided that any changes will be introduced from the start of the next valuation cycle. This will impact valuation dates from September 2008, with any necessary recovery plans due up to 15 months later in December 2009.”

More than 80 responses were received as part of the consultation, which the regulator is considering carefully before reaching a conclusion on the best way forward. The regulator expects to publish a full response to the consultation and the final version of its new approach later in the summer

Editor's notes

1. The next defined benefit scheme valuation cycle starts in September 2008. Within 15 months of the scheme valuation date the valuation must be undertaken, and, where there is a deficit, a recovery plan submitted to the regulator. Therefore recovery plans in this cycle will be due from December 2009.
2. The regulator’s consultation document, Good practice when choosing assumptions for defined benefit pension schemes with a special focus on mortality, was published on 18 February 2008. This consultation suggested that schemes should be transparent and evidence-based when considering longevity and that evidence points to more rapid future improvements in life expectancy than many schemes currently assume. The document also set out a suggested approach for taking longevity into account as part of the scheme specific funding regime that is already in operation and proposed timing for introducing this change. The deadline for responses was 12 May 2008.
3. The Pensions Regulator is the regulator of work-based pension schemes in the UK, with objectives to protect members' benefits, promote good administration and reduce the risk of calls on the Pension Protection Fund. Our approach is risk-based focusing on education and enablement, with enforcement where appropriate. We have the ability to:
4. • collect information about pension schemes; through scheme returns, under the scheme funding regime and as well as statutory (including whistleblowing) reports;
   • issue notices requiring actions to tackle non-compliance, prohibit trustees who are judged not fit and proper to carry out their duties or appoint independent trustees;
   • direct pension schemes as to how to calculate their liabilities and the contributions required;
   • issue a contribution notice where there is a deliberate attempt to avoid liabilities, or a financial support direction where the employer is a service company or insufficiently resourced.