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We’ve published new versions of the following valuation guidance documents:

  • Guidance for undertaking the valuation in accordance with section 143 of the Pensions Act 2004 (version H7)
  • Guidance for actuaries conducting a valuation under section 152 and statement setting out how we’ll make a funding assessment under section 152 of the Pensions Act 2004 (version D4)
  • Guidance for actuaries conducting a valuation under section 156 of the Pensions Act 2004 (version C4)
  • Guidance for undertaking the valuation in accordance with section 179 of the Pensions Act 2004 (version G9)

We’ve also updated our information note Additional information for carrying out a section 143 valuation and published a new information note Information for valuing benefits in respect of the Hampshire, Hughes and Bauer judgments in a section 143 valuation.  

These two information notes supplement H7, D4 and C4 and give more detail for actuaries carrying out s143, s152 and s156 valuations. 

Why we’ve updated the valuation guidance documents

The main reason for updating the valuation guidance documents is to allow for recent court judgments. The new versions of the valuation guidance documents and the information notes set out how these judgments should be allowed for in s143, s152, s156 and s179 valuations. We’ve also taken the opportunity to make some other minor updates to the documents including regarding the treatment of step-ups and step-downs. 

Disapplication of the compensation cap

The Court of Appeal’s judgment on the Hughes judicial review in July 2021 established that the PPF compensation cap should be disapplied. This is reflected in all the documents listed above.  

Hampshire and Bauer judgments

The Hampshire and Bauer judgments could give rise to additional PPF compensation. A scheme only transfers to the PPF if its s143, s152 or s158 valuation shows that it’s underfunded, so it’s important to establish whether the impact from these judgments would move the valuation from an overfunded to an underfunded position.  The new information note clarifies how this should be done, with the accuracy of the approach dependent on the scheme’s funding position before making any such allowances. 

The updated s179 valuation guidance confirms our previous interim position that no allowance needs to be made for the impacts of the Hampshire or Bauer judgments.  This is because s179 valuations are used primarily to distribute levies among the schemes in our universe, which necessarily involves some approximations.  We’ve taken a proportionate approach and consider that the additional burden on the industry to calculate the impact of these judgments would not be justified by the relatively modest redistribution of levy likely to result.  

Interim allowances for equalisation of Guaranteed Minimum Pensions (GMPs)

We published an information note on our website (last updated in January 2021) in response to the Lloyds judgments of 2018 and 2020, setting out how schemes should make interim allowances for GMP equalisation in their s179 valuations.  We’ve removed this information note from our website and incorporated it in the updated s179 valuation guidance, to provide a single source of reference.   

Effective date

The new versions of the valuation guidance documents and information notes come into effect on 1 December 2021.  Schemes and advisors who are in the process of carrying out s143, s152 or s156 valuations under an earlier version of the relevant guidance should discuss the approach with their usual PPF actuarial contact.

The two information notes are also relevant to s143, s152 or s156 valuations with an effective date on or before 1 December 2021, and therefore under previous versions of the guidance.  Note that, since the Hughes judgment in July 2021, the PPF compensation cap no longer applies for any period, therefore the compensation cap must not be used in the calculation of PPF compensation in s143, s152, s156 or s158 valuations.

Next steps 

Read all updated valuation guidance documents and information notes.