Summary funding statements update

The Pensions Regulator today issued additional guidance for pension scheme trustees and their professional advisers on summary funding statements.

Under the new scheme specific funding regime, trustees must issue regular summary funding statements to all scheme members and beneficiaries providing them with information about the funding of their scheme.

The regulator's guidance clarifies the need for summary funding statements issued before a scheme has had its first actuarial valuation under the new funding regime to include an explanation of any changes to the scheme's funding position.

Trustees are not required to obtain additional specific actuarial calculations in order to identify whether the funding position has changed since the last valuation under the previous MFR regime. Only where trustees are aware of changes in funding because of actuarial information obtained for some other scheme purpose need they include an explanation of the changes in the summary funding statement.

Initial summary funding statements must be issued before 22 September 2006, followed by updated statements in each subsequent year prior to a scheme's first valuation under the new regime.

The guidance also makes clear that trustees of hybrid schemes need not issue summary funding statements to members who have solely money purchase benefits.

The additional guidance 'Summary funding statements' is available on the Pension Regulators website www.thepensionsregulator.gov.uk/schemeFunding/
summaryFunding/

The regulator's Code of Practice on funding defined benefits is also available at

1. The new scheme funding requirements are part of wider reforms set out in the Pensions Act 2004. Elements of the scheme funding provisions take account of the funding requirements in Directive 2003/41/EC on the activities and supervision of institutions for occupational retirement provision.
2. This legislation replaced the minimum funding requirement (MFR) and came into force on 30 December 2005. The new requirements apply to valuations based on an effective date of 22 September 2005 onwards but completed after 30 December 2005. Trustees beginning their valuation between 22 September and 30 December have 18 months to complete their valuation and put in place an updated schedule of contributions, instead of the usual 15 months. Guidance on the timings for actuarial valuations under the new scheme funding legislation can be found on the Pensions Regulator's website. Schemes with more than 100 members are required to issue summary funding statements before 22 September 2006, irrespective of the effective date of their first valuation under the new requirements."
3. Codes of practice are not statements of the law and there is no penalty for failing to comply with them. It is not necessary for all the provisions of a code of practice to be followed in every circumstance. Any alternative approach to that appearing in the code of practice will nevertheless need to meet the underlying legal requirements, and a penalty may be imposed if these requirements are not met. When determining whether the legal requirements have been met, a court or tribunal must take any relevant provisions of a code of practice into account.
4. The Pensions Regulator is the regulator of work-based pensions in the UK, with wide ranging and flexible powers under the Pensions Act 2004.
5. The powers of the Pensions Regulator include the ability to:
   • collect more detailed scheme information;
   • issue improvement notices and third party notices, enabling the regulator to ensure problems are put right;
   • freeze a scheme that is at risk, while the regulator investigates; and
   • prohibit trustees who are judged not fit and proper to carry out their duties.
   • The Pensions Act 2004 also imposes a statutory obligation on 'whistleblowers' to report suspected breaches of the legislation to the regulator.

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