The Occupational Pension Schemes (Employer Debt) Regulations 2005

[F1Calculation of the amount of scheme liabilities and value of scheme assetsU.K.

5.—(1) The value of the assets which are to be taken into account for the purposes of section 75(2) and (4) of the 1995 Act shall be determined, calculated and verified by the trustees or managers.

(2) The liabilities which are to be taken into account for the purposes of section 75(2) and (4) of the 1995 Act shall be determined by the trustees or managers and the amount of those liabilities shall be calculated and verified by the actuary.

(3) [F2The assets of the scheme are to be valued, the liabilities of the scheme are to be determined and the amounts of those liabilities are to be calculated by reference to the same date.]

(4) Subject to paragraph (15), the assets of a scheme to be taken into account by the trustees or managers are the assets attributable to the scheme in the relevant accounts, excluding—

(a)any resources invested (or treated as invested by or under section 40 of the 1995 Act) in contravention of section 40(1) of the 1995 Act (employer-related investments);

(b)[F3any amounts which are—

(i)treated as a debt due to the trustees or managers under—

(aa)section 75(2) or (4) of the 1995 Act (deficiencies in assets);

(bb)section 228(3) of the 2004 Act (amounts due in accordance with a schedule of contributions);

(cc)sections 59(2) (determination of contributions: supplementary) or 60(5) (serious under provision) of the 1995 Act as they were in force before 30th December 2005;

(dd)section 75(1) of the 1995 Act as it was in force before 6th April 2005; or

(ee)section 144(1) of the 1993 Act (deficiencies in the assets of a scheme on winding up) as it was in force before 6th April 1997, and

(ii)unlikely to be recovered without disproportionate cost or within a reasonable time;]

(c)where it appears to the actuary that the circumstances are such that it is appropriate to exclude them, any rights under an insurance policy; and

(d)assets representing the value of any rights to money purchase benefits under the scheme; and

where arrangements are being made by the scheme for the transfer to or from it of any accrued rights and any pension credit rights, until such time as the trustees or managers of the scheme to which the transfer is being made (“the receiving scheme”) have received the assets of the full amount agreed by them as consideration for the transfer, it shall be assumed that any assets transferred in respect of the transfer of those rights are assets of the scheme making the transfer and not assets of the receiving scheme.

(5) An updated asset assessment may be used for the purposes of paragraph (4) if—

(a)the trustees or managers, after consulting the cessation employer and other scheme employers, so decide; and

(b)section 75(4) of the 1995 Act applies by virtue of an employment-cessation event.

(6) The value to be given to the assets of a scheme by the trustees or managers is—

(a)the value given to those assets in the relevant accounts or in the updated asset assessment less, in either case, the amount of the external liabilities;

(b)in the case of any rights under an insurance policy taken into account notwithstanding paragraph (4)(c), the value the actuary considers appropriate in the circumstances of the case.

(7) [F4For the purposes of paragraph (6)—

(a)“external liabilities” means such liabilities of the scheme as are shown in—

(i)the net assets statement in the relevant accounts; or

(ii)an estimate used for the purposes of an updated asset statement,

except that the liabilities in paragraph (8) are to be disregarded; and

(b)the amount of the external liabilities is—

(i)where sub-paragraph (a)(i) applies, the amount shown in the statement referred to in that sub-paragraph in respect of the external liabilities; or

(ii)where sub-paragraph (a)(ii) applies, the amount shown in the estimate referred to in that sub-paragraph in respect of the external liabilities.]

(8) Subject to paragraphs (9), (13) and [F5(14)], the liabilities of a scheme to be taken into account by the trustees or managers are any liabilities—

(a)in relation to a member of the scheme by virtue of—

(i)any right that has accrued to or in respect of him to future benefits under the scheme rules,

(ii)any entitlement to the present payment of a pension or other benefit which he has under the scheme rules, and

(b)in relation to the survivor of a member of the scheme, by virtue of any entitlement to benefits, or right to future benefits which he has under the scheme rules in respect of the member.

(9) The liabilities of a scheme to be excluded from paragraph (8) are—

(a)liabilities secured by an insurance policy the rights under which are excluded under paragraph (4)(c); and

(b)liabilities representing the value of any rights to money purchase benefits under the scheme.

(10) For the purposes of paragraph (8)—

(a)where arrangements are being made by the scheme for the transfer to or from it of accrued rights and any pension credit rights, until such time as the trustees or managers of the scheme to which the transfer is being made F6... have received the assets of the full amount agreed by them as consideration for the transfer, it shall be assumed that the rights have not been transferred;

(b)it shall be assumed that all pensionable service under the scheme ceased before the applicable time; and

(c)the following definitions shall apply—

“right” includes a pension credit right; and

“the survivor” of a member is a person who has survived the member and has any entitlement to benefit, or right to future benefits, under the scheme on account of the member.

(11) The amount of the liabilities in respect of pensions and other benefits is to be calculated and verified by the actuary on the assumption that they will be discharged by the purchase of annuities of the kind described in section 74(3)(c) of the 1995 Act (discharge of liabilities; annuity purchase) and for this purpose the actuary must estimate the cost of purchasing annuities.

(12) [F7For the purposes of paragraph (11),] the actuary must estimate the cost of purchasing the annuities—

(a)on terms the actuary considers consistent with those in the available market and which he considers would be sufficient to satisfy the scheme's liabilities in respect of pensions and other benefits, or

(b)where the actuary considers that it is not practicable to make an estimate in accordance with sub-paragraph (a), in such manner as the actuary considers appropriate in the circumstances of the case.

(13) The liabilities shall include all expenses (except the cost of the annuities) which, in the opinion of the trustees or managers of the scheme, are likely to be incurred in connection with the winding-up of the scheme.

(14) An [F8updated liabilities assessment] may be prepared by the actuary for the purposes of paragraph (8) if—

(a)the trustees or managers, after consulting the actuary and the cessation employer, so decide; and

(b)section 75(4) of the 1995 Act applies by virtue of an employment-cessation event.

(15) [F9An amount B is an asset of the scheme to be taken into account by the trustees or managers only if—

(a)the scheme has not commenced winding-up at the applicable time;

(b)the amount B is part of a withdrawal arrangement or an approved withdrawal arrangement which is in force before the applicable time; and

(c)the trustees or managers are reasonably satisfied that the guarantors have sufficient financial resources at the applicable time to be likely to pay the amount B.]

(16) For the purposes of paragraph (15), amount B shall be determined by the trustees or managers and calculated by the actuary as if it had become due at the applicable time.

(17) Where in these Regulations there is a reference to—

(a)the amount of any liability being calculated or verified in accordance with the opinion of the actuary or as he thinks appropriate, or

(b)the actuary preparing an [F10updated liabilities assessment],

he must apply any relevant [F11FRC standards] in making that calculation or verification, or preparing that update.

(18) The amount of the liabilities of a scheme which are to be taken into account for the purposes of section 75(2) and (4) of the 1995 Act must be certified by the actuary in the form set out in Schedule 1 to these Regulations.

(19) This regulation is subject to regulation 6 (multi-employer schemes: general), regulation 6C (withdrawal arrangements) and regulation 7 (approved withdrawal arrangements).]