The intention behind section 143 of the Pensions Act 2004 is that a scheme in an assessment period should not transfer to the Pension Protection Fund if benefits at least equal to the compensation provided by the Pension Protection Fund could have been secured with an insurer on the assessment date. The assets and liabilities for the section 143 valuation are established in accordance with section 143, the Pension Protection Fund (Valuation) Regulations 2005 (SI 2005 / 672), as amended, and guidance issued by the Board. The valuation is carried out by an actuary and approved by the Board.
The Board calculates the Pension Protection Levy quantum and individual schemes’ levies based on section 179 valuations conducted by the scheme actuary. A section 179 valuation is in principle very similar to a section 143 valuation but contains several simplifications. A section 179 valuation is justifiably simpler than a section 143 valuation because consistency and simplicity matter more for section 179 purposes than a high level of precision. Also many schemes will never need to undertake the more precise calculations entailed by a section 143 valuation.
It should be noted that, for levy calculation purposes, a section 179 valuation is rolled forward from its valuation date to the date used in the calculation for assessing underfunding. Part of this roll-forward methodology serves to adjust for changes in section 179 assumptions between the two dates.
The Pensions Regulator uses a scheme’s section 179 valuation result as one of its triggers for further investigation when reviewing a scheme’s technical provisions.
