PPF pushes ahead with actuarial assumption changes after consultation

The Pension Protection Fund (PPF) has confirmed changes to the actuarial assumptions used in section 143 and section 179 valuations following a consultation.

The majority of the changes will be in line with the proposals set out in the PPF’s consultation, which received 13 responses and was open from 4 February to 18 March, with a slight amendment to the mortality assumptions for s143 valuations.

Commenting on the consultation, the PPF said: “The response to the proposed changes was generally positive and there was acceptance that bulk annuity prices had altered sufficiently as to merit a change to the assumptions at the present time.

“There were some suggestions as to how we might amend the way we construct our basis, which we will continue to investigate in our next review of assumptions. On the whole, the responses were sufficiently supportive that we have decided to proceed with the majority of our proposed set of assumptions but with an amendment to the mortality assumptions.”

The primary objectives of the initial proposals included intentions to adopt the S3 mortality series and S3 tables for mortality assumptions, amending the components of the post-retirement post-97 discount rates to better reflect current consumer price index pricing, and changing the formula for calculating wind-up expenses resulting in a cap at £3m.

Due to concerns raised in the responses, the PPF said it had decided to amend the mortality assumptions for the s143 valuations to better reflect the original construction of the S3 tables, opting to use light tables for all males with pensions above £22,500 and females with pensions higher than £9,000.

PPF said this change would “only impact schemes with very high earners and these schemes can request bespoke scheme specific mortality assumptions if necessary”.

Updated assumptions guidance documents are now available on the PPF’s website.

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