Funding

Methods of valuing defined benefit liabilities

How defined benefit (DB) liabilities should be valued depends on:

1. •

   whether the liabilities in question relate to past service or future service, and

2. •

   the valuation method to be used. Common types of valuations carried out include:

   1. ◦

      scheme-specific funding valuations (see ‘The scheme-specific funding regime’ below)

   2. ◦

      solvency (or buy-out) valuations

   3. ◦

      for actuarial valuations with an effective date on or after 22 September 2024, valuations on a low dependency funding basis (see ‘The scheme-specific funding regime’ below)

   4. ◦

      valuations on a pension protection fund (PPF) basis as required by the Pensions Act 2004, ss 143 and 179 (often referred to respectively as s 143 valuations and s 179 valuations)

   5. ◦

      neutral estimates as described under E.2.10 of the Pensions Technical Actuarial Standard

   6. ◦

      cash equivalent transfer values as specified under the Occupational Pension Schemes (Transfer Values) Regulations 1996, SI 1996/1847

   7. ◦

      valuations on an accounting basis (often referred to as IAS19 and UK GAAP valuations) 

For further information, see Practice Note: Methods of valuing DB pension liabilities and related funding concepts.

The scheme-specific