As we anticipated, Opra yesterday withdrew (Update 2), with immediate effect, the relaxed stance in relation to compliance described last February in Update 1.

The new transfer value regulations (SI 2003/1727) and version 9.0 of actuarial Guidance Note GN 11, are both now in force. Opra now expects all trustees of defined benefit schemes to provide statements of entitlement to a cash equivalent transfer value (CETV) within 3 months of the member’s request where possible, and in any case where this is not possible for reasons beyond their control, within 6 months. Where the request was made in the 3-month period leading up to 4 August 2003, Opra expects trustees to act well within this 6-month limit. These time limits are prescribed by section 93A of the Pension Schemes Act 1993 (inserted by s.153 of the Pensions Act 1995 ) and the Transfer Values Regulations SI 1996/1847.

Where a full CETV cannot be provided without adversely affecting the rights to full CETVs of all other members, trustees now have the power to reduce the amount quoted to a fair share of the fund. The problem is that to do this, trustees must first obtain evidence of this underfunding via a GN 11 actuarial report from the Scheme Actuary. Furthermore, transfer values cannot be reduced below the MFR minimum unless the most recent full actuarial valuation shows a deficit. All this takes time and will put pressure on scheme actuaries.

There are still some further issues. The actuarial report must value each elements of the CETV separately, and take into account the priority order on winding-up; but it is unclear whether the pre-2007 or post-2007 order should be used. Valuations normally use the post-2007 order as the scheme is assumed to be ongoing. However, in current circumstances the pre-2007 order might seem more appropriate, but Update 2 offers no help on this point. Worse, there is a strong possibility that the priority order will be changed later this year, to make it fairer to members who have not yet retired; that will mean trustees need to get another GN 11 report.*

One uncertainty arising from GN 11 has been clarified by the Pensions Board of the actuarial profession, however. Paragraphs 5.3.1 and 5.3.3 of GN 11 version 9.0 refer to "cash equivalents" for pensioner members, whereas the law requires their benefits to be valued on a full buy-out basis. However, the Board considers GN 11 does not prevent this basis being used to calculate cash equivalents for pensioners.

* Update 17 September 2003