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Key points

  • Commission actuarial valuations periodically (at least every three years) to assess your scheme funding levels.
  • Work with the scheme actuary to ensure you’re using appropriate assumptions for valuing the scheme.
  • Submit valuation information to us using our Exchange online service.

Statutory funding objective

Your defined benefit (DB) scheme is subject to the statutory funding objective, which means it needs to have appropriate assets to cover its accrued liabilities (known as ‘technical provisions’). You must prepare and maintain a statement of funding principles setting out your policy for meeting the statutory funding objective and a schedule of contributions covering payments due to the scheme.

You need to commission actuarial valuations periodically (at least every three years) to check your scheme meets the statutory funding objective. If the scheme doesn’t meet the objective, you need to put in place a recovery plan.

Actuarial valuation

You should commission a full actuarial valuation at least every 3 years. If you obtain an interim actuarial report for each intervening year, you won’t need to commission the full valuation more frequently.

The actuarial valuation must incorporate the actuary’s certification of the technical provisions calculation and the schedule of contributions.

The valuation must include the actuary’s estimate of the scheme’s solvency.

You must choose a method for calculating the scheme’s technical provisions, ie the value of benefits accrued to a particular date. You must take advice from the actuary on the differences between the methods and their impact on the scheme.

Choosing assumptions

You are responsible for choosing prudently the assumptions that will be used for calculating the technical provisions. This includes taking account of the degree to which the employer can support a range of likely adverse outcomes. You must take advice from the scheme actuary on making relevant assumptions.

Your assumptions should be evidence-based.

Ensure you discuss with the actuary how sensitive the technical provisions are to changes in the value of assumptions. The more sensitive technical provisions are to changes in an assumption, the more important it is you choose an appropriately prudent value for that assumption.

Between actuarial valuations

You may need to take some actions between valuations. This includes:

  • producing actuarial reports which provide an update on the funding position since the last full actuarial valuation
  • monitoring and responding to changes in circumstances, eg reviewing scheme documents such as the investment strategy, funding strategy or recovery plan
  • issuing a summary funding statement to members and beneficiaries within 3 months of receiving each actuarial valuation or actuarial report: the statement is members’ main source of information on funding matters.

Submitting valuation information

You need to submit valuation information to us via our Exchange online service. You can find details of documents you need to submit in Appendix 1 of the Funding defined benefits code.

If you fail to agree a valuation then we will take enforcement action where necessary.

Complete our valuation questionnaire

We’re working with a number of smaller DB schemes as they approach their valuations, asking them to think about some specific matters (relevant to their scheme) during the valuation process. These matters are based on information we hold about the scheme and their previous valuations.

We’ve asked these schemes to submit a questionnaire when they send their valuation to us, detailing how they have addressed the issues we’ve specifically highlighted to them. The responses will give us a better understanding of how trustees have approached their valuations and will help us decide whether to engage with them further.

Although the questionnaire has been designed with smaller schemes in mind, we think it will be helpful to all schemes going through their valuation process. Therefore, we would encourage you to complete the questionnaire alongside your valuation if you wish. It will improve our engagement with schemes of all sizes if we can understand more about how you have gone about your valuation.

If you would like to submit the questionnaire to us along with your valuation, you can do so via Exchange, in the last section called ‘other supporting documents’.

For further information go to deciding your funding approach and annual funding statements

Managing funding risks

You should integrate your management of funding risks with your management of risks in relation to employer covenant and investment. You should take an appropriate and proportionate approach to managing these risks.

Trustee toolkit online learning

Go to the Trustee toolkit The ‘Funding your DB scheme’ module contains information on measuring scheme funding levels. You must log in or sign up to use the Trustee toolkit.

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