Viability certificate

CDC code in force: 31 July 2026

1. To provide a viability certificate for a viability report, certifying that in the actuary’s opinion the scheme design is sound, the scheme actuary must have regard to a range of matters¹. The scheme actuary’s explanation of their conclusions on these matters must be provided to the trustees in connection with the viability report for which the viability certificate has been produced. The trustees must provide a copy of this explanation to us with the viability report.
2. We expect the scheme actuary to use the template provided in preparing a viability certificate. Where this template is used and completed properly, we will be satisfied that the viability certificate is sufficiently comprehensive. It must contain²:
   1. the effective date of the certificate
   2. the name and contact details of the scheme actuary
   3. the name of the scheme in respect of which the viability certificate is given
   4. a statement, signed by the scheme actuary, confirming that, in the scheme actuary’s opinion, the design of the scheme is sound and that when providing the viability certificate, the scheme actuary has had regard to the applicable matters in regulation 11(2)

Scheme rules

3. The scheme actuary must be satisfied that the scheme rules meet the legislative requirements on benefit calculation and adjustments³. As mentioned above, we expect trustees to take legal advice on these matters and the scheme actuary may wish to do likewise. But it is for the actuary to decide how they comply with this requirement, and while we do not expect them to obtain their own legal advice, they may if they consider it appropriate.
4. In respect of multi-employer CDC schemes, one particular requirement is that accrual rates should be set such that the value of benefits provided is equal in value to the value of contributions paid⁴. Scheme actuaries should follow relevant guidance and/or standards issued by the Financial Reporting Council (FRC) when setting accrual rates.

Scheme communications

5. The scheme actuary must have regard to whether, in the actuary’s opinion, the trustees have accurately described or explained in the member booklet, the statement of scheme design and the wording used in the most recent benefit statements⁵. This includes:
   1. the methods by which the scheme determines the rate or amount of benefits provided under the scheme
   2. estimates of the rate or amount of any future pension benefits payable under the design of the scheme
   3. that the future pension benefits payable under the scheme are subject to annual adjustment in accordance with the rules of the scheme
6. We expect trustees to communicate this information to members clearly and comprehensibly. The actuary should be satisfied that what the trustees include in the communications to members (set out above a. to c.) aligns with how the scheme operates and relevant actuarial advice, in a way that is not misleading. In forming their opinion, we expect the scheme actuary to review the generic communications and templates relating to items (a) to (c) above. We do not expect the actuary to approve every individual piece of member communication.

Viability certificate tests at authorisation (the gateway tests)

7. Regulations set out two gateway tests that the scheme actuary must have regard to at authorisation.
8. We expect both tests to be met for a scheme actuary to be able to provide a viability certificate. An explanation of the following must be included in the actuary’s advice to the trustees in connection with the viability report for which the certificate is produced:
   1. the scheme actuary’s conclusions
   2. the assumptions used in carrying out the tests, the testing or modelling used in assessing scheme design

The first gateway test: Funding for CPI indexation

9. This test considers whether the estimated projected average annual increase in benefits earned over the first 10 years of the scheme’s operation is at least in line with the expected level of increase in the consumer price index (CPI)⁶. This test must⁷ use a central estimate basis.

The second gateway test: Minimum value of benefits

10. This test considers whether the value of the benefits expected to be provided to each active member based on the first five years of the scheme’s operation is at least equal to the contributions payable to the scheme by the member over that period⁸. This is designed to limit the amount of cross-subsidisation between members. This test does not take account of contributions that will be made by the member’s employer in respect of the member, except those made as a result of a salary sacrifice arrangement.
11. This test should also use a central estimate basis in estimating the expected value of benefits to be provided to each member.

Viability certificate tests thereafter (the live running tests)

12. Following initial authorisation, the first gateway test no longer applies. This means in live running there is no requirement for the scheme to award increases every year in line with CPI.
13. Single-employer CDC schemes have two live running tests and multi-employer CDC schemes have one live running test. The scheme actuary must have regard to these when providing a viability certificate at any time after the scheme has begun operating⁹ and has at least one active member. We expect the tests or test to be met for a scheme actuary to be able to provide a viability certificate. As with the gateway tests set out above, an explanation of the following must be included in the actuary’s advice to the trustees in connection with the viability report for which the certificate is produced:
    1. the scheme actuary’s conclusions
    2. the assumptions used in carrying out the tests
    3. the testing or modelling being considered by the trustees in assessing scheme design
14. A valuation of the scheme must be undertaken annually in order to determine the benefit adjustments necessary to keep the value of liabilities in line with the value of assets. We anticipate that these tests will be conducted following or in conjunction with the valuation and will therefore use relevant information from that year’s valuation.
15. In addition, we expect trustees and the scheme actuary to monitor any trends indicated by the live running test or tests and consider these trends, as well as the results of that year’s tests, in making decisions regarding benefits and the design of the scheme.

The first live running test for both types of scheme: Minimum value of benefits

16. This test considers whether the value of the benefits expected to be provided to each active member in respect of the five-year period beginning with the effective date of the viability certificate, is at least equal to the contributions payable to the scheme by the member over that period¹⁰. This is designed to limit the amount of cross-subsidisation between members. This test does not take account of contributions that will be made by the member’s employer in respect of the member, except those made as a result of a salary sacrifice arrangement.
17. This test should also use a central estimate basis in estimating the expected value of benefits to be provided to each member.

The second live running test (single-employer CDC schemes only): Excessive cross-subsidy

18. This test considers the risk of excessive cross-subsidy and is applied as part of the scheme actuary’s annual recertifcation of viability. This test highlights large differences between the value of benefits that are expected to be earned and the contributions being paid to the scheme that could be perceived as unfair to either new joiners or long-time members. Where it is failed, the cross-subsidy has become too large over a sustained period.
19. In relation to each actuarial valuation, the scheme actuary must calculate the value of benefits expected to be earned in the year following the effective date of that valuation and express it as a percentage of pensionable salary¹¹. This is over the active member population as a whole, not on an individual-member basis.
20. To apply the test, they must then compare the average of the results of this calculation over the five-year test period with the rate of contributions paid to the scheme by members and employers. If the average is less than half or more than twice this rate, the test is failed.
21. Where the scheme has been operating for less than five years, this test must be conducted by reference to the average of the results available.

Legal references

¹ Regulation 11(2) of the 2022 Regulations and Regulation 34(2) of the 2025 Regulations

² Part 3 of Schedule 2 to the 2022 and 2025 Regulations

³ Regulation 11(2)(a) of the 2022 Regulations and Paragraph 13(2) of Schedule 2 to the 2025 Regulations

⁴ Regulation 40(5) of the 2025 Regulations

⁵ Regulation 11(2)(b) of the 2022 Regulations and Regulation 34(2)(a) of the 2025 Regulations

⁶ Regulation 11(2)(c)(i) and 11(4) of the 2022 Regulations and Regulation 34(2)(b)(i) and 34(4) of the 2025 Regulations

⁷ Regulation 11(4) of the 2022 Regulations and Regulation 34(4) of the 2025 Regulations

⁸ Regulation 11(2)(c)(ii) and 11(6) of the 2022 Regulations and Regulation 34(2)(b)(ii) and 34(6) of the 2025 Regulations

⁹ Regulations 11(2)(d) and (13) of the 2022 Regulations and Regulations 34(2)(c) and (11) of the 2025 Regulations

¹⁰ Regulations 11(7) and (8)(b)(ii) of the 2022 Regulations and Regulations 34(7) and (8)(b)(ii) of the 2025 Regulations

¹¹ Regulations 11(10)(d) and (9) of the 2022 Regulations

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