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Home > Format of an Actuarial Valuation

15.0 Introduction

This section details the content of the actuarial valuation. It covers:


the valuation’s purpose


benefit and data summaries


funding objectives


dealing with surpluses and shortfalls.


Actuarial reports

Under ‘scheme-specific funding’ (the funding basis that has applied to actuarial valuations undertaken since 23 September 2005), trustees are obliged to obtain actuarial valuations at intervals of not more than one year. However, scope exists for valuations to take place at intervals of between one and three years, on the proviso that trustees obtain an ‘Actuarial Report’ each year, mid-valuation, identifying changes or developments that have affected the funding of the scheme’s ‘technical provisions’ [see 14.7.1 (Note)] since the last report or valuation.

Summary funding statement

The actuarial report is also expected to confirm the extent to which funding meets ‘buy-out’ levels (known as solvency on winding up), plus it triggers an annual Summary Funding Statement [see 14.7.6] to be issued to all members within 15 months of the effective date of the report. The summary funding statement provides members with an annual assessment of the scheme’s updated funding levels, keeping members informed about the progress in the scheme’s funding levels since the last report or actuarial valuation.

Statutory Funding Objective

Defined Benefit schemes are expected to meet their Statutory Funding Objective [see 14.7.1].In setting their Statutory Funding Objective, trustees, on actuarial advice and with the agreement of the employer, will determine the methods and assumptions used for determining the objective. In particular, as well as assisting The Pensions Regulator to meet its own objectives [see 15.3.4 (Note)], a Code of Practice recognises both the trustees’ objectives (principally ‘to comply with their fiduciary duties and ensure that scheme benefits can be paid as they fall due’) and the employer’s objectives (‘to run their own businesses and grow them as appropriate, while ensuring that they are able to provide the pensions they have promised’) and also acknowledges ‘that a strong, ongoing, employer alongside an appropriate funding plan is the best support for a well-governed scheme’.

The scheme’s Statement of Funding Principles, funding recovery plans (as necessary) and schedule of contributions must be finalised within 15 months of the effective date of the valuation.

Summary outcomes:


trustees may only make funding decisions after obtaining actuarial advice on assumptions


the scheme must adopt a funding target specific to the circumstances of their scheme to make provision for benefits already accrued (known as the scheme’s ‘technical provisions’) [see 14.7.1 (Note)]


trustees must obtain the employer’s agreement to the method and assumptions for the calculation of their scheme’s ‘technical provisions’


where valuations reveal a shortfall (i.e. assets are less than funding target), trustees and the employer are expected to agree a funding recovery plan to bring funding back to 100%


future contributions (members’ and employer) are set out in a schedule of contributions agreed with the employer


in the ultimate, if agreement on funding cannot otherwise be reached with the employer, this may lead to redesign of future service benefits, or worse, winding up


failure to complete any element of the scheme-specific funding process within the timescales set by law will have to be reported to the Regulator.

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