The Pension Protection Fund has confirmed it is making changes to the actuarial assumptions used in s179 and s143 valuations, following a consultation.

By law, the PPF has to set its valuation assumptions to reflect pricing in the bulk annuity market.

Section 143 valuations are used to determine whether a scheme should enter the PPF following an insolvency event and Section 179 valuations are used to calculate scheme underfunding to determine the risk-based pension protection levy that a scheme should pay.

As set out in the consultation, the most significant changes, which come into effect from tomorrow, 1 December, are: the use of separate discount rates for pensioners and non-pensioners post retirement; the use of yield indices that have durations that better match average liability durations, including the introduction of a new index-linked gilt yield; and updated mortality assumptions.

There are also consequential changes to valuations carried out under sections 152, 156 and 158.

The Section 143 assumptions guidance document can be found here and the Section 179 assumptions guidance document can be found here. In addition, a response to the consultation is available on the PPF’s website.

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