The Pension Protection Fund (Valuation) Regulations (Northern Ireland) 2005

Made: 16th March 2005

Coming into operation: 6th April 2005

The Department for Social Development, in exercise of the powers conferred on it by Articles 2(5)(a), 127(3) to (5) and (11)(a), 129(4), 162(1)(a), (2) and (3), 172(1) and 287 (2) and (3) of the Pensions (Northern Ireland) Order 2005[^f00001] and of all other powers enabling it in that behalf, hereby makes the following Regulations:

Citation, commencement and interpretation

1

• (1) These Regulations may be cited as the Pension Protection Fund (Valuation) Regulations (Northern Ireland) 2005 and shall come into operation on 6th April 2005.

• (2) In these Regulations –

• “the Order” means the Pensions (Northern Ireland) Order 2005;

• “appropriate person” in the case of an Article 127 valuation, means the person specified in Article 127(11)(a)(ii) of the Order , in the case of an Article 127 determination means the Board and, in the case of an Article 162 valuation means the actuary as defined in Article 162(2) of the Order;

• “the assessment date” means the date on which the assessment period in relation to the scheme or section, or (where there has been more than one such assessment period) the last one, began;

• “Article 127 determination” means a determination by the Board under Article 127(2)(a) of the Order;

• “Article 127 valuation” means an actuarial valuation under Article 127(2)(b) of the Order;

• “Article 136 determination” means a determination by the Board for the purposes of Article 136(2B) of the Order;

• “Article 136(9) valuation” means a valuation obtained under Article 136(9) of the Order;

• “Article 136(10A) valuation” means a valuation under Article 136(10A) of the Order;

• “Article 142 determination” means a determination by the Board under Article 142(3)(a) of the Order;

• “Article 142 valuation” means a valuation obtained under Article 142(3)(b) of the Order;

• “Article 162 valuation” means an actuarial valuation under that Article of the Order;

• “Article 75 debt” means so much of the amount treated by Article 75 of the 1995 Order[^f00002] (deficiencies in the assets) as a debt due from the employer to the trustees or managers at the applicable time;

• “commencement date” means 6th April 2005;

• “contribution notice” means a notice issued under Article 34 (contribution notices where avoidance of employer debt), 43 (contribution notices where non-compliance with financial support direction) or 51 (contribution notice where failure to comply with restoration order) of the Order;

• “eligible scheme” has the meaning given by Article 110 of the Order (eligible schemes);

• “employer”, in relation to—an occupational pension scheme which is not a multi-employer scheme; ora single-employer section of a segregated scheme,which has no active members, includes the person who was the employer of persons in the description of employment to which the scheme or section relates immediately before the time at which the scheme or section ceased to have any active members in relation to it;

• “employer”, in relation to a non-segregated scheme or a multi-employer section of a segregated scheme—in an assessment period, includes any person who before the assessment date has ceased to be the employer of persons in the description of employment to which the scheme or section relates unless condition A, B, C or D is satisfied where—condition A is that an Article 75 debt became due from that employer and the full amount of the debt has been paid before the assessment date;condition B is that—such a debt became due;a legally enforceable agreement has been entered into the effect of which is to reduce the amount which may be recovered in respect of the debt; andthe reduced amount has been paid in full before the assessment date;condition C is that such a debt became due but before the assessment date it is excluded from the value of the assets of the scheme or section because it is unlikely to be recovered without disproportionate costs or within a reasonable time;condition D is that at the time at which any such person ceased to be the employer of persons in the description of employment to which the scheme or section relates the value of the assets of the scheme or section was such that no such debt was treated as becoming due;in any other case, includes any person who has ceased to be the employer of persons in the description of employment to which the scheme or section relates unless condition A, B, C or D is satisfied where—condition A is that an Article 75 debt became due from that employer and the full amount of the debt has been paid;condition B is that—such a debt became due;a legally enforceable agreement has been entered into the effect of which is to reduce the amount which may be recovered in respect of the debt; andthe reduced amount has been paid in full;condition C is that such a debt became due but it is excluded from the value of the assets of the scheme or section because it is unlikely to be recovered without disproportionate costs or within a reasonable time;condition D is that at the time at which any such person ceased to be the employer of persons in the description of employment to which the scheme or section relates the value of the assets of the scheme or section was such that no such debt was treated as becoming due;

• “employment” means trade, business, profession, office or vocation;

• “external liabilities” means any liabilities which do not fall due to the members of the scheme;

• “financial support direction” means a direction issued under Article 39 of the Order (financial support directions);

• “non-segregated scheme” means a multi-employer scheme which is not a segregated scheme;

• “pension credit rights” has the meaning given by Article 121(1) of the 1995 Order[^f00003] (interpretation of Part II);

• “pre-6th April 1997 contract of insurance” means a contract of insurance that—falls within the definition of a relevant contract of insurance in Article 145(8) of the Order (effect of Board assuming responsibility for a scheme);was taken out before 6th April 1997; andthe trustees or managers are, or should reasonably be, aware of;

• “registrable scheme” has the meaning given by Article 55(5) of the Order (registrable information);

• “relevant accounts” for the purposes of identifying and valuing the assets of a scheme, means audited accounts for the scheme which—contain the information specified in the Schedule;show a true and fair view of—the financial transactions of the scheme during the period to which the accounts relate (“the accounting period”);the amount and disposition of the assets at the end of the accounting period; andthe liabilities of the scheme, other than the liabilities to pay pensions and benefits, after the end of the accounting period;include a report by the auditor in writing as to whether or not, in his opinion, the requirements of paragraphs (a) and (b) are satisfied; andare prepared in respect of a period ending with the relevant time of the valuation;

• “relevant time” for the purposes of Article 162 of the Order, means the date in relation to which the assets and liabilities of the eligible scheme are calculated;

• “restoration order” has the meaning given by Article 48 of the Order (restoration orders where transactions at an undervalue); ...

• “restricted information” has the meaning given in Article 179 of the Order (restricted information).

• “segregated scheme” means a multi-employer scheme which is divided into two or more sections where—any contributions payable to the scheme by an employer in relation to the scheme or by a member are allocated to that employer’s or that member’s section; anda specified proportion of the assets of the scheme is attributable to each section of the scheme and cannot be used for the purposes of any other section.

Provision of actuarial valuation to determine scheme underfunding

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• (1) The trustees or managers of an eligible scheme shall provide the Board or the Regulator on the Board’s behalf with its first Article 162 valuation—

• (a) in the case of an eligible scheme which is a registrable scheme prior to 6th April 2007—

• (i) within 15 months of the relevant time of that valuation; or

• (ii) by 31st March 2008,

whichever is the earlier;

• (b) in the case of an eligible scheme which becomes a registrable scheme on or after 6th April 2007, within 15 months of the effective date of the first actuarial valuation obtained by them under Article 203 of the Order (actuarial valuations and reports).

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) The relevant time of any subsequent Article 162 valuation must not exceed a period of three years beginning immediately after the relevant time of the previous valuation provided to the Board or the Regulator on the Board’s behalf.

• (5) Any subsequent Article 162 valuation shall be provided to the Board or the Regulator on the Board’s behalf within 15 months of the relevant time of that valuation.

Excluded assets

3

There shall be excluded from the value of the eligible scheme’s assets –

• (a) in the case of an Article 127 determination or Article 127 valuation, any amounts treated as a debt due to the trustees or managers which are unlikely to be recouped without disproportionate cost or unlikely to be recovered within a reasonable time; and

• (b) in the case of an Article 162 valuation –

• (i) any amounts treated as a debt due to the trustees or managers under Article 75 of the 1995 Order (deficiencies in the assets);

• (ii) any amounts treated as debt under Article 207(3) of the Order (failure to make payments);

• (iii) any resources invested (or treated as invested) in contravention of Article 40 of the 1995 Order (restriction on employer-related investments); and

• (iv) any amounts treated as a debt due to the trustees or managers which are unlikely to be recouped without disproportionate cost or unlikely to be recovered within a reasonable time.

• (c) in the case of either an Article 127 determination, Article 127 valuation or Article 162 valuation, an amount in respect of the value of any pre-6th April 1997 contract of insurance if—

• (i) the trustees or managers have taken all reasonable steps to obtain information concerning that contract of insurance (whether by searching the records of the scheme or otherwise); and

• (ii) the information that they provide concerning that contract of insurance is insufficient, in the opinion of the appropriate person, to conduct a valuation.

Contribution notices, financial support directions and restoration orders

4

Subject to regulation 7(3) and (4), the prescribed requirement for any amount due under a contribution notice, financial support direction or restoration order to be regarded as an asset of the scheme is that the notice, direction or order was issued by the Regulator prior to the date that the determination is made or the valuation is approved.

Valuation of assets

5

Subject to regulations 3 and 7, in determining the value of the assets of a scheme for the purposes of obtaining an Article 127 valuation or an Article 162 valuation, the appropriate person shall adopt the value given of the assets of the scheme stated in the relevant accounts, less the amount of the external liabilities, and that value shall be taken to be the value of those assets at the relevant time.

Valuation of protected liabilities

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• (1) Subject to regulation 7, in the case of protected liabilities[^f00004] the value of a protected liability shall be –

• (a) for an Article 127 determination or Article 127 valuation, the estimated cost of securing scheme benefits calculated in accordance with Schedule 6 to the Order (pension compensation provisions) to the member by means of an annuity purchased at the best value rate available in the market as estimated by the Board at the relevant time;

• (b) for an Article 162 valuation, the estimated cost of securing scheme benefits in accordance with any guidance issued by the Board in accordance with Article 162(4) of the Order, for the member by means of an annuity purchased at the best value rate available in the market as estimated by the Board at the relevant time.

• (2) Where regulation 3(c) applies, the amount representing the value of a protected liability in respect of the benefits secured by a pre-6th April 1997 contract of insurance shall be excluded from the valuation of the eligible scheme’s protected liabilities.

Alternative valuation of assets and protected liabilities in specific cases

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• (1) For the purposes of an Article 127 determination, Article 127 valuation or Article 162 valuation, where arrangements are being made by the eligible 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 (“the receiving scheme”) have received assets of the full amount agreed by them as consideration for the transfer, it shall be assumed –

• (a) that the rights have not been transferred; and

• (b) that any assets transferred in respect of the transfer of those rights are assets of the scheme making the transfer and not of the receiving scheme.

• (2) For the purposes of an Article 127 Article 127 or Article 162 valuation, in the case of a contract of insurance, the value shall be –

• (a) the value of the liability secured where the contract of insurance falls within the definition of a relevant contract of insurance in Article 145(8) of the Order (effect of Board assuming responsibility for a scheme); or where this is not the case either –

• (b) the surrender value of the contract of insurance; or

• (c) where it appears to the appropriate person that the surrender value of the contract of insurance does not accurately reflect the actual value at the relevant time; then he shall adopt such a value as appears to him to be appropriate.

• (3) In the case of an asset to which regulation 4 applies, the appropriate person shall adopt as the value of the asset, the amount due to the scheme given in the notice, direction or order.

• (4) For the purposes of ... –

• (a) an Article 127 determination or an Article 127 valuation, where the appropriate person, in accordance with guidance issued by the Board in accordance with the statement issued by the Board under Article 127(5C) or Article 127(6) of the Order, holds the opinion that any Article 75 debt falling due to the eligible scheme will be recouped in the future then he shall treat the proportion of the Article 75 debt that he believes will be recovered as an asset of the scheme;

• (b) an Article 127 determination or an Article 127 valuation, where any Article 75 debt is recouped between the relevant time and the date the determination is made under Article 127(2)(a) of the Order or the date the valuation is approved under Article 128(2) of the Order (approval of valuation), then the amount so recouped –

• (i) shall be treated as an asset of the scheme; and

• (ii) the Article 127 determination or Article 127 valuation shall be adjusted accordingly;

• (c) an Article 127 determination or an Article 127 valuation, where an amount is due under a contribution notice, a financial support direction or a restoration order, and

• (i) either none of the amount due or only a proportion of the amount due has been recouped; and

• (ii) the appropriate person, in accordance with a statement issued by the Board under Article 127(5C) or any guidance issued by the Board in accordance with Article 127(6) or 162(4) of the Order as appropriate, holds the opinion that no further some or all of the payments due in relation to the notice or direction will not be recouped by the scheme; then

the appropriate person shall adjust the value of the asset contained in the notice or direction to the value recouped by the trustees or managers of the eligible scheme during the pre-approval period.

• (d) an Article 127 valuation, if the appropriate person –

• (i) has been given notice; or

• (ii) holds the opinion;

that the value of any asset set out in the relevant accounts, that is not excluded from the actuarial valuation, is substantially different at the relevant time from that set out in the relevant accounts, then he shall adjust the value of the asset to the market value of the asset at the relevant time; or

• (e) an Article 127 valuation, where the appropriate person –

• (i) has been given notice; or

• (ii) holds the opinion

in accordance with any Board guidance issued in accordance with Article 127(6) of the Order, that there exists an asset of the scheme which is not listed in the relevant accounts, and which is not excluded from the actuarial valuation, then he shall adopt such a value for the asset as he considers is appropriate.

• (5) The appropriate person shall not make an adjustment to the value of an interest in real property unless the adjustment reflects a more recent valuation given by a chartered surveyor in accordance with any relevant practice statements and guidance notes issued by the Royal Institution of Chartered Surveyors[^f00005] current on the date that the valuation is signed.

Application of these regulations to multi-employer schemes

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In these Regulations, in the case of a scheme which is a multi-employer scheme for the purposes of the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations (Northern Ireland) 2005[^f00006], where these Regulations apply to a section or a segregated part of a scheme, which is for the purposes of Part III of the Order, an eligible scheme, for “eligible scheme” and “scheme” substitute “section or segregated part of a scheme”.

Form and content of Article 127 valuation and notice

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• (1) An Article 127 valuation shall be in writing, and shall contain the following information –

• (a) a statement of the assets and protected liabilities of the eligible scheme calculated in accordance with these Regulations and guidance issued by the Board in accordance with Article 127(6) of the Order;

• (b) a statement that the valuation was prepared in accordance with these Regulations and any guidance issued by the Board in accordance with Article 127(6);

• (c) a statement that the valuation does not take effect until the valuation has become binding;