Valuation of assets and liabilities
Section 143: Board’s obligation to obtain valuation of assets and protected liabilities
472.This section requires the Board to obtain an actuarial valuation of the assets and liabilities of the scheme in order to determine whether the assets of the scheme are less than the protected liabilities. It must make this determination so that it can decide whether it is required to assume responsibility for the scheme.
473.Subsection (2) states that the Board must, as soon as is reasonably practicable, obtain an actuarial valuation of the scheme as at the relevant time. This is the time before the qualifying insolvency event mentioned in section 127 (duty to assume responsibility for schemes following an insolvency event), or, as the case may be, before the application or notification under section 129(applications and notifications for the purposes of section 128) was made or received.
474.Subsection (3) provides that if the requirements set out in regulations are met, regulations provide that the following are to be assets or protected liabilities for the purposes of this valuation:
a debt due to trustees or managers by virtue of a contribution notice under section 38, 47 or 55;
an obligation arising under a financial support direction (see section 45);
an obligation imposed by a restoration order (see section 52).
475.Subsection (4) provides that regulations may prescribe how the assets and the protected liabilities of eligible schemes and their amount or value are to be determined, calculated and verified. Regulations may provide for the valuation to take account of events occurring during the period beginning with the relevant time and ending with the time the valuation is approved under section 144, when valuing certain assets and liabilities. Those assets/liabilities are
a section 75 debt;
a debt due by virtue of a contribution notice issued under section 38, 47 or 55;
an obligation arising under financial support for the scheme;
an obligation imposed by a restoration order made under section 46 in respect of a transaction involving assets of the scheme. This is in order that the Board need not assume responsibility for a scheme which could be wound up to the benefit of members.
476.Subsection (6) states that subject to any provision made in regulations under subsection (4), a valuation must accord with any guidance issued by the Board.
477.Subsection (7) states that when calculating the amount of any liabilities, a provision of the scheme rules which limits the amount of the scheme’s liabilities by reference to the value of its assets is to be disregarded. Such a rule places an artificial restriction on the value of a scheme’s liabilities.
478.Subsection (8) provides that when the Board ceases to be involved with a scheme it no longer has a duty to obtain an actuarial valuation under subsection (2). It is, for example, possible that the employer and associated pension scheme could be rescued before the valuation is completed, and in such circumstances it would not be necessary to complete the valuation.
479.Subsection (9) provides that the Board need not undertake an actuarial valuation of a scheme when it considers that an event (such as a repayment of a debt or other event as listed in this subsection) may occur. Such an event could affect the value of the assets or the amount of the protected liabilities of the scheme for the purposes of the valuation.
480.In addition, under subsection (10) provision has been made to take account of the Board having power to review ill health awards. This means that the Board cannot be required to obtain the valuation whilst it may review ill health pensions under section 140. This is because such a review may affect the valuation.
481.Subsection (11) defines “actuarial valuation” as a valuation of assets and protected liabilities of the scheme that is prepared and signed by a person with the appropriate qualifications or experience or a person approved by the Secretary of State. The necessary qualifications on experience will be detailed in regulations. The form of the valuation and the information to be contained within the valuation will be set out in regulations.
Section 144: Approval of valuation
482.The purpose of this section is to require the Board to determine whether to approve a scheme valuation and where it approves a valuation, to provide a copy of it to specified persons.
483.Subsection (1) provides that this section applies where the Board obtains a valuation in respect of a scheme under section 143 (Board’s obligation to obtain valuation of assets and protected liabilities).
484.Subsection (2) states that if the Board is satisfied that the valuation has been prepared in accordance with section 143 it must approve the valuation, and give a copy of it to the Regulator, the scheme trustees or managers and the insolvency practitioner of the employer or the employer. Subsection (3) states that if the Board is not satisfied that the valuation is in accordance with section 143 then it must obtain a further valuation under that section.
Section 145: Binding valuations
485.This section provides for when a valuation becomes “binding” for the purposes of Chapter 3 of Part 2. By virtue of section 160(transfer notice), the Board cannot assume responsibility for a scheme until the valuation is binding.
486.Subsection (1) provides that the valuation only becomes binding once it is approved under section 144 and the period to review the approval of the valuation has expired, and any review, reconsideration or reference to the PPF Ombudsman of the approval of the valuation and any appeal against his decision has been completed.
487.Subsection (2) states that once a valuation has become binding it is conclusive for the purposes of establishing whether scheme assets are less than the protected liabilities for the purpose of section 127 or under section 128. Subsection (2) ensures that even where a binding valuation is obtained account can be taken of subsequent fraud compensation payments (see section 172) (relationship with fraud compensation regime).
488.Subsection (3) provides that the Board must notify the trustees or managers, the insolvency practitioner (or, if none, the employer) and the Regulator once the valuation becomes binding. Subsection (4) states that a notice under subsection (3) must be in the prescribed form, and contain the prescribed information, as set out in regulations.
