The Pension Protection Fund has issued updated valuation assumption guidance for both s179 and s143 valuations, following the consultation which began in July 2009 (see Aries article). The new guidance - A5 (for s.179 valuations) and B4 (for s.143 valuations) - applies to valuations with an effective date on or after 31 October 2009. The response to the consultation was also published last week.

In summary, the assumption changes are to:

• increase the yields used to discount future payments by 0.1% p.a. in deferment;
• increase the yields used to discount future payments by 0.3% p.a. in payment;
• change one of the yields used as a reference point to one with a longer duration;
• increase the assumption about future longevity improvements for males, and
• reduce the proportion of members who are married or who have relevant partners by 5%.

BT pension scheme to pay PPF levy

Meanwhile, today the DWP launched an eight-week consultation on the draft Pension Protection Fund and Occupational Pension Schemes (Miscellaneous Amendments) Regulations 2010, which aim to amend the PPF entry rules and other rules that apply to schemes that have a partial Crown guarantee. The four sets of Regulations are respectively the

• The Pension Protection Fund (Partially Guaranteed Schemes) (Modification) Regulations 2005 (SI 2005/277);
• The Pension Protection Fund (Entry Rules) Regulations 2005 (SI 2005/590);
• The Occupational Pension Schemes (Levies) Regulations 2005 (SI 2005/842); and
• The Pension Protection Fund (General and Miscellaneous Amendments) Regulations 2006 (SI 2006/580).

Some schemes are not eligible for the PPF and consequently are not liable to pay pension protection levies. The Entry Rules Regulations describe the schemes which are not eligible schemes. These include unfunded public service schemes: schemes to which a Minister of the Crown has given a guarantee and public sector schemes providing pensions to local government employees. Schemes with a partial Crown guarantee, that is, a guarantee covering only certain members, benefits or any particular part of a scheme are eligible schemes but will only be liable to pay the PPF levies in respect of that part of the scheme that does not have a Crown guarantee.

A Crown guarantee for the BT Pension Scheme (BTPS)'s defined benefit liabilities was granted by the UK Government in 1984, at the time of BT's privatisation. The guarantee can only be called upon if BT becomes insolvent and if there are not enough assets in its pension fund to finance the relevant employees' pension rights.

In 2006, following a complaint, the European Commission initiated a preliminary investigation to consider whether the guarantee provided an advantage to BT (in particular by reducing the levy payable to the PPF), and therefore gave rise to an incompatible State aid. In their decision of 11 February 2009, the Commission concluded that a UK Crown guarantee covering the pension liabilities of BT plc on the EU telecommunications markets was partially incompatible under EC Treaty State aid rules. The resulting partial exemption from payment of a levy to the PPF since 2005 conferred an unfair competitive advantage to BT that constituted State aid. The Commission decided that such aid cannot be justified under EU rules because it merely dispensed BT from charges that its competitors have to pay. As a result of the Commission's decision, the UK Government was asked to cease the incompatible aid.

The result is these draft Regulations, which remove the partial exemption of the BTPS from payment of a PPF levy, arising from the Crown guarantee, and hence avoid granting an incompatible State aid. The intention is that the Regulations should come into force in the current tax year to enable the PPF to issue an invoice to the BTPS for the PPF levy for 2009/10 and for the Pensions Regulator to issue an invoice for the administration levy for that financial year as well.

Pensions Regulator launches new form for capturing recovery plan data

TPR has made some changes to the information captured in the valuation summary form - the form that is sent to the regulator alongside a recovery plan - to make it easier for them to review recovery plans and also to bring the mortality information requested more in line with the scheme return. The new form [xls], published today, has already benefited from some informal pre-release testing from the actuarial profession.

The new form should be used for valuations with an effective date from 22 September 2008, unless submitted before 9 November 2009 (in which case either the old or the new version can be used).

For valuations with an effective date before 22 September 2008, use the current form [xls].