The Pension Protection Fund (PPF) has launched a consultation into changing the assumptions used for assessment and levy valuations in order to keep them in line with the bulk annuity market.

The proposals included in the consultation would be to update mortality assumptions by moving to the latest “S3” series mortality tables and to use the CMI 2019 mortality projections model, as well as changing the discount rates for pensioners and non-pensioners post-retirement.

Additionally, amending the calculation for wind-up expenses and slightly reducing pensioner and non-pensioner benefit installation or payment expenses was mooted.

Looking into the impact of the changes, the PPF’s consultation document estimated that the changes would reduce the value of scheme liabilities during a section 143 PPF assessment valuation, although it noted that the actual impact would differ based on a scheme’s duration and membership profile.

Additionally, it was reckoned that changes to the levy valuations would improve the aggregate funding ratio of the 5,318 schemes in the PPF 7800 index from 93.5 per cent to 97.6 per cent and move 261 schemes from deficit to surplus, with the deficit of schemes in deficit reducing from £253bn to £204bn.

Under the Pensions Act 2004, the PPF is required to keep the assumptions in line with estimated pricing from the bulk annuity market.

The online consultation will end at 5pm on Thursday 18 March 2021 and a summary of responses will be published on the PPF website, while the changes for valuations are set to be introduced on or after 1 May 2021.

PPF chief finance officer and chief actuary, Lisa McCrory, said: “As part of a regular review, in December last year we held discussions with eight insurance companies about whether our current assumptions were dated and need reassessing.

“Based on these discussions, we’re now consulting on our proposals, to find out whether our updated assumptions strike the right balance with the bulk annuity market. We want to invite stakeholders to share their views on our proposals which will help shape future actuarial assumptions.”

Responses can be made to the consultation online at https://www.ppf.co.uk/2021-consultation-valuation-assumptions or email responses to assumptions@ppf.co.uk

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