The Pension Protection Fund (PPF) is consulting on changes to its liability valuation methods in light of increased competition in the bulk annuity market.
The defined benefit lifeboat fund launched the consultation today, proposing new calculations for section 143 and section 179 liability measures.
The proposed changes relate to discount rates and longevity assumptions, the PPF said, adding that they would “generally reduce estimated scheme liabilities”.
Section 143 relates to schemes in the PPF’s assessment period and is used to assess whether they have sufficient assets to pay at least PPF compensation levels. Section 179 relates to the PPF funding level measure for all private sector schemes, as illustrated monthly in the PPF 7800 index.
The latter measure is also used to calculate the PPF’s levy on DB schemes, although the fund is not charging a regular levy this year due to its strong funding position and following a rule amendment in the Pension Schemes Act.
In a press release, the PPF said bulk annuity pricing had “become more competitive” since its last valuation method review in 2023.
Aaron Pang, the PPF’s acting chief actuary, said: “We regularly review our valuation assumptions to ensure they remain appropriately aligned with the bulk annuity market and continue to meet the objectives set out in legislation.
“Our latest review suggests that market pricing has moved since the assumptions were last comprehensively updated. The proposals in this consultation are intended to reflect those developments while continuing to provide a practical and proportionate framework for valuations.”
The consultation is open until 16 September.
