Skip to main content
  • PPF proposes introducing the ability for actuaries to use bespoke discount rates in s143 valuations for smaller schemes.  
  • New proposal will provide additional flexibility and ability for s143 valuations to better reflect buy-out pricing for smaller schemes, while minimising disruption and additional burden on actuaries and the schemes they advise. 
  • Consultation will close on 6 May 2024. 
  • Consultation seeks views on introducing proposed changes for valuations on or after 31 May 2024 

The Pension Protection Fund (PPF) has today launched a consultation on proposed changes to the assumptions it uses for certain valuations which provide an estimated price for securing PPF benefits with bulk annuity providers in the buyout market.  

When a scheme’s employer becomes insolvent, triggering the entry of an eligible DB scheme into a PPF assessment period, a s143 valuation is needed to assess if the scheme can secure benefits with an insurer at or above the levels provided by the PPF.  

The PPF is proposing to allow actuaries to use a bespoke discount rate assumption when conducting a s143 valuation of schemes with liabilities of less than around £50m. 

Actuaries use a number of assumptions when undertaking these valuations – this includes a prescribed discount rate assumption.  For larger schemes, this assumption leads to an accurate estimate of the price of securing PPF benefits with an insurer.  However, the relative price for smaller schemes to secure an insurance buy-out is typically higher. The use of a standard discount rate is therefore underestimating the buy-out price for these schemes. 

Feedback from marginally overfunded smaller schemes that enter the buy-out market has shown they often struggle to receive affordable buy out quotes, and usually run-on as closed schemes before re-entering the PPF. The proposed changes will not impact s179 valuations. 

Shalin Bhagwan, Chief Actuary and interim Chief Finance Officer for the PPF, said: “For smaller schemes that enter our assessment period, our current assumptions are likely to be understating their liabilities. This means marginally overfunded smaller schemes typically exit PPF assessment to pursue deals with buyout providers. However, due to their size and being only marginally overfunded, they often can’t get an affordable buy-out quotation for even PPF levels of compensation.  

“This results in additional administrative costs as they run on as closed schemes looking for buy-out solutions. After all options have been exhausted, the schemes often wind up back at the PPF. This can be a prolonged and costly experience for both the trustees and members. 

“We hope these proposed changes will have a positive impact on marginally overfunded smaller schemes that enter our assessment period. We look forward to hearing from actuarial professionals and trustees on our consultation proposals.”  

Currently the PPF only permits actuaries to use bespoke s143 assumptions for mortality, some other demographic assumptions, and expenses, where there is sufficient evidence to justify them. Following discussions with six bulk annuity providers and eight PPF-panel trustee and advisory firms, the PPF concluded that otherwise the current standard assumptions generally remain appropriate. 

The consultation will close on 6 May and seeks views from actuarial professionals and industry stakeholders on this approach and, if there is agreement, when it should be introduced. Responses can be sent to [email protected]  


Notes to Editors  

The Pensions Act 2004 requires the PPF to keep the assumptions used for valuations under sections 143, 152, 156, 158, and 179 of the Act in line with the estimated price of securing PPF levels of compensation with a bulk annuity provider. 

A section 143 valuation is carried out during a PPF assessment period. The assets and liabilities for the section 143 valuation are established in accordance with section 143, the Pension Protection Fund (Valuation) Regulations 2005 (SI 2005 / 672), as amended, and guidance issued by the Board of the PPF. The valuation is carried out by an actuary appointed by the Board and the valuation is approved by the Board.  

A section 152 valuation is carried out following an application for reconsideration under section 151 of the Pensions Act 2004.  

Section 156 valuations must be carried out on a regular basis by a scheme that has been granted authorisation by the Board to run as a closed scheme having demonstrated that it was over 100 per cent funded at a section 143 valuation.  

A section 158 valuation is carried out by a scheme that has been running as a closed scheme, following an application to commence a further assessment period under section 157.  

A section 179 valuation estimates a scheme's funding if the employer was to enter insolvency. The section 179 valuations are used to apportion the PPF levy.  

About the PPF  

The Pension Protection Fund (PPF) is a public corporation, set up by the Pensions Act 2004, and has been protecting members of eligible defined benefit (DB) pension schemes across the UK since 2005. The PPF is run by an independent Board and accountable to Parliament through the Secretary of State for the Department for Work and Pensions. It protects close to 10 million members belonging to more than 5,100 pension schemes. If an employer collapses and its DB pension scheme cannot pay members what they were promised, the PPF pays compensation for their lost pensions. The PPF is funded by a levy charged to eligible schemes, the return on its investments, assets from pension schemes transferred into the PPF and recoveries from insolvent employers. 

The PPF is one of the UK’s largest asset owners with £32.5 billion of assets under management. It also administers the Fraud Compensation Fund (FCF) and the Government’s Financial Assistance Scheme (FAS), and across both the PPF and FAS looks after nearly 440,000 members.   


For further press information contact:
PPF Press Office
020 8406 2107
[email protected]
Follow us on 
X and LinkedIn