Rachel Dalton looks at the industry's response to the PPF's proposals to ease schemes' entry into the lifeboat fund.
In July, the Pension Protection Fund launched a consultation on ways in which it could ease schemes’ entry into the fund. It has since published a summary of responses from the industry, and indicated how it is likely to alter its rules.
The consultation focused on the PPF (Miscellaneous Amendments) Regulations 2012. In these new regulations, it proposed to reduce the strict need for a formal section 143 valuation of a scheme where a scheme is clearly under- or over-funded.
Instead, the PPF proposed that schemes would be able to enter using a more approximate valuation carried out by an actuary to assess its eligibility for PPF entry.
As well as this, the new regulations would make it easier for schemes which cannot obtain protected benefits quotations from reinsurers to apply for PPF entry.
Barnett Waddingham partner and head of PPF services Robert Hawkes explains: “When a sponsoring employer has failed and the scheme is in the PPF assessment period, and everyone knows a scheme would be better off with reinsurance, this will make it easier for the scheme to move on without having to do an s143.
“Or, if the scheme is clearly going to qualify, the proposals would mean the scheme does not need to go through an s143 and members have the certainty that their scheme is in the PPF sooner.”
He added that the protected benefit quotation rule would also make it easier for schemes whose value has fallen since the insolvency of their sponsor.
“Under the new rules, a scheme could say it could not get a quote from the market, because it was overfunded at the time of the insolvency some time ago but underfunded now and so enter the PPF,” he says.
On the whole, respondents were happy with the use of funding determinations rather than s143 valuations for under- or over-funded schemes, although one or two questioned what the PPF’s definition of under- or over-funding might be.
The PPF said it will decide which schemes it feels are suitable for making a funding determination. This decision will be based on information already available to the PPF about the latest known funding position and the quality of the scheme data so that any changes which need to be made since the previous valuation can be taken into consideration.
The PPF said it will publish guidance for actuaries on what should be taken into account when updating valuations.
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