Hundreds of schemes to move to surplus under PPF’s proposals

The pensions lifeboat launched a consultation on Thursday on its proposals to change the actuarial assumptions under section 143 valuations, used for assessment, and section 179 valuations, used for levy calculations, since a “recent review of the valuation assumptions showed they need updating to align with pricing in the bulk annuity market”.

As the PPF 7800 index tracks the aggregate section 179 funding position of schemes eligible for protection at the lifeboat, the proposed changes to this valuation would “improve the aggregate funding ratio from 93.5 per cent to 97.6 per cent, and move 261 schemes from deficit to surplus”, the PPF estimated.

It added that the deficit of schemes in deficit would reduce to £204bn from £253bn.

To bring the section 143 and section 179 assumptions in line with the current market pricing, the PPF is proposing to update the mortality assumptions by moving to the latest S3 series mortality tables and to use the Continuous Mortality Investigation’s 2019 mortality projections model.

The lifeboat is also suggesting changing the discount rates for pensioners and non-pensioners post-retirement, and to amend the calculation for wind-up expenses and slightly reduce pensioner and non-pensioner benefit installation/payment expenses.

Lisa McCrory, PPF’s chief finance officer and chief actuary, said: “As part of a regular review, in December last year we held discussions with eight insurance companies about whether our current assumptions were dated and need reassessing. 

“Based on these discussions, we’re now consulting on our proposals to find out whether our updated assumptions strike the right balance with the bulk annuity market.

“We want to invite stakeholders to share their views on our proposals, which will help shape future actuarial assumptions.”

The consultation closes on March 18 2021 and a summary of responses will be published on the PPF’s website.