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The Actuary The magazine of the Institute & Faculty of Actuaries
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PPF updates pension valuation assumption guidance

The Pension Protection Fund (PPF) has updated its valuation assumption guidance for both s179 and s143 valuations.

The new assumptions, which take effect from 1 April 2011, have been set following talks with insurers earlier in the year and confirmed with respondents following a consultation. They reflect the fact that currently the insurance market is making no difference between the pricing of CPI and RPI linked annuities.

>> ‘Guidance on assumptions to use when undertaking a valuation in accordance with Section 143 of the Pensions Act 2004’

>> ‘Guidance on assumptions to use when undertaking a valuation in accordance with Section 179 of the Pensions Act 2004’

The Guidance follows the consultation which began in February 2011.
‘The response to the February 2011 consultation on assumptions to be used for valuations under Section 143 and Section 179 of the Pensions Act 2004’

The PPF says that it will be monitoring the market closely so that any changes can be reflected in the assumptions as and when the CPI market develops. In summary, the assumption changes are to:
>> reduce the effective yields used to discount future payments by 0.2 per cent year for compensation in payment, and
>> increase the assumption about future longevity improvements for males.