Two trade bodies have warned of negative consequences for some pension schemes, including superfunds, emanating from the Pension Protection Fund’s (PPF) consultation on its valuation methods.
The Association of Consulting Actuaries (ACA) and the Society of Pension Professionals (SPP) have broadly backed proposed changes to the PPF’s assumptions used for section 143 and section 179 valuations, after a review found bulk annuity pricing had become more competitive since its last detailed assessment.
The proposed changes to discount rates and longevity assumptions would generally reduce estimated scheme liabilities.
Section 143 valuations assess whether schemes in a PPF assessment period can secure PPF-level benefits with an insurer. Section 179 valuations establish eligible schemes’ assets and liabilities on a PPF basis, and inform the lifeboat fund’s monthly 7800 Index of private sector defined benefit (DB) schemes.
While s179 valuations are not currently feeding into conventional levy calculations, they continue to be used in the PPF’s risk modelling and publications, as well as alternative covenant scheme levies and the default superfund wind-up trigger.
The ACA said the consultation should be used to reconsider whether all schemes still need to carry out a detailed s179 valuation every three years, with the conventional PPF levy remaining at zero for a second consecutive year.
Peter Williams, chair of the ACA pension schemes committee, said: “Given levy payments are not currently required, it is disproportionate for all schemes to have to carry out a detailed s179 valuation every three years. The PPF clearly needs to understand the risks it faces, but there may be simpler and more proportionate ways of getting the information it needs.”
The ACA also objected to proposals to apply the revised assumptions to valuations with effective dates from 31 May 2026, saying schemes should not have to revisit work already under way. It wants the new requirements to become mandatory only for valuations with effective dates after the final assumptions are published.
“Changes to the section 179 basis should not result in levies increasing materially simply because of a technical change in the valuation methodology.”
The association also raised a knock-on issue for the Pensions Regulator’s (TPR) Fast Track funding regime. Some Fast Track requirements rely directly on s179 assumptions, including estimates of how many members may leave a pension to a spouse or partner.
The ACA said changes made by the PPF for its own purposes could therefore automatically alter TPR’s separate funding requirements, and urged the regulator to consider whether that direct link remains appropriate.
Meanwhile, the SPP warned that allowing for post-retirement increases on eligible pre-1997 PPF compensation could increase s179 liabilities and, in turn, alternative covenant scheme levies unless the framework is recalibrated.
Jon Forsyth, chair of the SPP’s DB committee, said: “Changes to the section 179 basis should not result in levies increasing materially simply because of a technical change in the valuation methodology.”
The consultation closes on 16 September, with the PPF expected to publish its final decision in October.
