The Pensions Regulator

Code of practice 10
Modification of subsisting rights

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The actuarial equivalence route

51. The actuarial equivalence route as set out in this code lays out the steps to be taken by any person wishing to modify a scheme by use of the actuarial equivalence requirement.
52. If the modification the trustees are considering is a detrimental modification which is not a protected modification, it can be made if either the consent requirement or the actuarial equivalence²⁶ requirement is satisfied in respect of the affected member.
53. The actuarial equivalence²⁷ requirement consists of:
    • the information requirement;
    • the actuarial value requirement; and
    • the actuarial equivalence statement requirement.

The information requirement

54. Trustees must, before the modification is made, take all reasonable steps to provide members with information in writing²⁸ that is adequate to clearly explain:
    • the nature of the modification;
    • its effect on them;
    • that they may make representations to the trustees concerning the modification, giving a reasonable opportunity for these to be made; and
    • that the actuarial equivalence requirements apply to them.
55. Additionally, the trustees should include in the information provided to members:
    • a brief explanation of what constitutes actuarial equivalence and how it has been achieved for the modification in question;
    • a clear explanation where, in the case of a detrimental modification, the intention is that the actuarial equivalence requirements will apply to those affected members who do not consent by a stated deadline, that the modification will apply to them whether they consent or not; and
    • a statement that affected members should consider whether they need to take their own independent financial advice.
56. If members ask for clarification of the proposals the trustees should arrange for any such questions to be answered as soon as reasonably practicable.
57. Trustees should consider whether it would be practicable and cost effective to provide members with one or more named contacts with whom they could discuss the proposed modification.
58. Trustees must take 'all reasonable steps'²⁹ to ensure the required information is provided to all affected members to whom the actuarial equivalence requirements apply (or might apply, in the case of those affected members who are subject to both the consent requirements and the actuarial equivalence requirements). What is reasonable will vary depending on the particular circumstances. For example:
    • where affected members are still employed by the scheme's sponsoring employer, use of internal post or email may be appropriate;
    • in the case of other members, the use of the post will usually be appropriate, although where contact has been lost and the changes are potentially material for some members trustees should consider using relevant local newspapers to alert deferred members to the proposals and invite them to make contact with the scheme.

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