Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996
1996 No. 1536
PENSIONS
The Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996
Made 12th June 1996
Laid before Parliament 18th June 1996
Coming into force 6th April 1997
The Secretary of State for Social Security, in exercise of the powers conferred on him by sections 41(1), (2)(c), (3)(b) and (6), 49(2) and (3), 56(2)(b) and (3), 57(1)(a) and (b), (2)(b), (4)(b) and (5), 58(2), (3)(a) and (c), (4)(b)(i), (5), (6)(a) and (b) and (7), 59(1) and (3), 60(2)(b), (3)(a) and (b), (4), (5)(b), (6) and (7), 61, 68(2)(e), 75(5), 118(1), 119, 124(1), 125(3) and 174(2) and (3) of the Pensions Act 19951and of all other powers enabling him in that behalf, by this instrument, which is made before the end of the period of 6 months beginning with the coming into force of the provisions of Part I of that Act by virtue of which it is made2, hereby makes the following regulations:—
Preliminary
Citation and commencement
1. These Regulations may be cited as the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 and shall come into force on 6th April 1997.
Interpretation
2.—(1) Unless the context otherwise requires, in these Regulations—
“the commencement date” means 6th April 1997;
“disclosure valuation” means an actuarial valuation required by regulation 8 of the Occupational Pension Schemes (Disclosure of Information) Regulations 19863;
“the effective date” —
(a) in relation to a minimum funding valuation, has the meaning given in section 56(5);
(b) in relation to a valuation obtained under regulation 30, means the date as at which the assets and liabilities are valued;
(c) in relation to a disclosure valuation, means the date as at which the valuation was made;
“equities” means investments falling within paragraph 1, 2, 4 or 5 of Schedule 1 to the Financial Services Act 19864;
“gilt-edged securities” means investments falling within paragraph 3 or 10 of Schedule 1 to the Financial Services Act 1986;
“minimum funding valuation” means an actuarial valuation required by section 57(1)(a) or 57(2);
“the relevant date” means—
(a) in relation to a minimum funding valuation, the effective date; and
(b) in relation to a certificate under section 57(1)(b) or a certificate under section 58 of the rates of contributions shown in a schedule of contributions, the date the certificate is signed;
“the schedule period” has the meaning given in regulation 16(3);
“scheme” in the cases mentioned in paragraphs 1 and 4 to 6 of Schedule 5 (sectionalised and partly approved or guaranteed schemes) must be construed in accordance with those paragraphs (and “employer” and “member” must be construed accordingly);
“serious shortfall valuation”, in relation to a scheme, means a minimum funding valuation for the scheme as a result of which section 60 (serious underprovision) applies;
“the transitional period” means the period of 5 years beginning with the commencement date.
(2) Unless the context otherwise requires—
(a)
(a) expressions used in these Regulations have the same meaning as if they were used in Part I of the Pensions Act 19955; and
(b)
(b) in these Regulations any reference to a section shall be construed as a reference to a section of that Act.
(3) References in these Regulations to the guidance in GN 27 are to the mandatory guidelines on minimum funding requirement (GN 27), prepared and published by the Institute of Actuaries and the Faculty of Actuaries6and approved for the purposes of these Regulations by the Secretary of State, with such revisions as have been so approved—
(a)
(a) in the case of guidance applicable in relation to a minimum funding valuation, as at the date of signing of the valuation; and
(b)
(b) in the case of guidance applicable to a certificate under section 57(1)(b) or a certificate under section 58 of the rates of contributions shown in a schedule of contributions, as at the relevant date.
(4) References in these Regulations to a relevant insolvency event occurring in relation to the employer have the same meaning as in section 75 (but see paragraph 1(2) of Schedule 4).
(5) In regulations 3 to 28 and in Schedules 1 to 4, the expression “these Regulations” does not include regulation 30.
Valuation of assets and liabilities
Determination, valuation and verification of assets and liabilities: general
3.—(1) The liabilities and assets of a scheme which are to be taken into account for the purposes of sections 56 to 61 (minimum funding etc.) and their amount and value shall be determined, calculated and verified by the actuary—
(a)
(a) in the manner specified in regulations 4 to 9;
(b)
(b) in the case of any valuation for the purpose of forming an opinion as to whether the minimum funding requirement is met on a relevant date, on the general assumptions specified in paragraphs (2) and (3); and
(c)
(c) in accordance with the guidance given in GN 27;
and where in these Regulations there is a reference to the value of any asset or the amount of any liability being calculated or verified in accordance with the opinion of the actuary or as he thinks appropriate, he shall comply with any relevant provisions in that guidance in making that calculation or verification.
(2) The assumptions mentioned in paragraph (1)(b) are—
(a)
(a) that no contributions will become due to the scheme from the employer or the members on or after the relevant date;
(b)
(b) that all pensionable service under the scheme ceased immediately before that date;
(c)
(c) that liabilities in respect of members will be so secured that—
(i) the benefits of pensioner members will be equal in value to those under the scheme; and
(ii) the benefits of active members and deferred members will be reasonably likely to be equal in value to those payable in respect of their accrued rights under the scheme; and
(d)
(d) that liabilities in respect of members will include such amounts in respect of the expenses involved in meeting them as are indicated by the guidance given in GN 27.
(3) Where arrangements are being made by the scheme for the transfer to or from it of accrued rights, until such time as the trustees or managers of the scheme to which the transfer is being made (“the receiving scheme”) have received assets of the full amount agreed by them as consideration for the transfer, it shall be assumed—
(a)
(a) that the rights have not been transferred; and
(b)
(b) that any assets transferred in respect of the transfer of those rights—
(i) are assets of the scheme making the transfer and not of the receiving scheme, and
(ii) have such a value as is determined in accordance with the guidance given in GN 27.
Determination and valuation of assets
4.—(1) Subject to the following provisions of this regulation and to regulations 3(3), 5, 6 and 9, in determining the value of the assets of a scheme for the purpose of forming an opinion as to whether the minimum funding requirement is met on a relevant date, the actuary shall adopt the value given to the assets of the scheme in the relevant accounts (less the amount of the external liabilities), and that value shall be taken to be the value of those assets on the relevant date.
(2) In this regulation “external liabilities”, in relation to a scheme, means such liabilities of the scheme (other than liabilities within regulation 7(1)(a) or (b)) as are shown in the net assets statement in the relevant accounts, and their amount shall be taken to be the amount shown in that statement in respect of them.
(3) In this regulation “relevant accounts”, in relation to a scheme, means audited accounts for the scheme—
(a)
(a) which comply with the requirements imposed under section 41; and
(b)
(b) which are prepared in respect of a period ending with the relevant date or, if none are so prepared—
(i) are the latest such accounts which are available at the relevant date, or
(ii) if in the opinion of the actuary it is practicable for them to be used, the latest such accounts which are available on the date of signing of the valuation.
(4) If—
(a)
(a) the actuary has been given notice that the value of any asset or the amount of external liabilities at the relevant date was substantially different from the value or amount determined in accordance with paragraph (1) or, as the case may be, paragraph (2); or
(b)
(b) the relevant accounts are such accounts as are mentioned in paragraph (3)(b)(i) or (ii) and in the opinion of the actuary the valuation of any asset or external liabilities in the accounts was substantially out of date by the relevant date,
then he shall make such adjustment to the value of that asset or, as the case may be, the amount of that external liability as appears to him appropriate to secure that the value or the amount he adopts is the market value of the asset or, as the case may be, the current amount of the liability.
(5) For the purposes of paragraph (4)—
(a)
(a) “market value” means the price which the asset might reasonably be expected to fetch on a sale in the open market, on the assumption that there were available to any prospective purchaser of the asset all the information which a prudent purchaser of it might reasonably require if he were proposing to purchase it from a willing vendor by private treaty and at arm’s length; and
(b)
(b) the question whether the value of any asset or the amount of any liability is substantially different or out of date shall be determined by comparing the amount of adjustment likely to be required with the value of the asset or, as the case may be, the amount of the liability, that will otherwise be adopted.
(6) No adjustment may be made under paragraph (4) of the value given to any real property or any interest in real property in the relevant...
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