We’ve issued new valuation guidance documents

We’ve published new versions of the following valuation guidance documents:

• Guidance for undertaking the valuation in accordance with section 143 of the Pensions Act 2004 (version H8)
• Guidance for actuaries conducting a valuation under section 152 and statement setting out how we’ll make a funding assessment under section 152 of the Pensions Act 2004 (version D5)
• Guidance for actuaries conducting a valuation under section 156 of the Pensions Act 2004 (version C5)
• Guidance for undertaking the valuation in accordance with section 179 of the Pensions Act 2004 (version G10)
• Statement on how PPF will make a funding determination (version F3)

We’ve also updated our information note: Information for valuing benefits in respect of the Hampshire, Hughes and Bauer judgments in a section 143 valuation (version 2).

This information note supplements H8, D5 and C5 and gives more detail for actuaries carrying out s143, s152 and s156 valuations. 

Why we’ve updated the valuation guidance documents

The main reason for updating the valuation guidance is to allow for the Retained EU Law (Revocation and Reform) Act 2023 and the Pensions Act 2004 (Amendment) (Pension Protection Fund Compensation) Regulations 2023.

This legislation impacts how the Hampshire and Bauer judgments are incorporated into PPF compensation for schemes that enter an assessment period on or after 2 January 2024.

The new versions of the valuation guidance and the information note set out how these judgments and associated legislation should be allowed for in s143, s152, s156 and s179 valuations. 

Hampshire judgment

The Pensions Act 2004 (Amendment) (Pension Protection Fund Compensation) Regulations 2023 retain the effect of the Hampshire judgment for schemes entering assessment after the sunset date in the REUL Act by incorporating a value test into the Pensions Act 2004.

The value test ensures that members’ PPF compensation is at least 50% of the value of their accrued scheme benefits.

This is the same test that the PPF and schemes in assessment have been applying to date to give effect to the Hampshire judgment. Therefore, in practical terms, there should be no change as a result of these new regulations.   

The updated s179 valuation guidance confirms our previous position that no allowance needs to be made for the impact of the value test. This is because s179 valuations are used primarily to distribute levies among the schemes in our universe, which necessarily involves some approximations.

We’ve taken a proportionate approach and maintain our previous view that the additional burden on the industry to perform the value test calculations would not be justified by the relatively modest redistribution of levy likely to result.  

Bauer judgment

In accordance with the Retained EU Law (Revocation and Reform) Act 2023, the effect of the Bauer judgment will not apply to schemes with an assessment date falling on or after 2 January 2024.

For s143, s152 and s156 valuations where the assessment period commences on or after 2 January 2024,  no allowance should be made for the Bauer judgment, as set out in the relevant information note.  

No allowance should be made for the Bauer judgment in s179 valuations, consistent with our previous approach.

Effective date

The new versions of the valuation guidance documents and information notes are effective from 1 January 2024. Schemes and advisors who are in the process of carrying out s143, s152 or s156 valuations under an earlier version of the relevant guidance should discuss the approach with their usual PPF actuarial contact.

Next steps 

Read all updated valuation guidance documents and information notes.