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Occupational final salary schemes must undertake actuarial valuations every three years. The valuation process, which is governed by legislation, has become of paramount importance to both trustees and sponsoring employers. As it incorporates the settlement of a schedule of employer contributions to the scheme and, where the scheme is underfunded, a recovery plan for removing the deficit.
The statutory valuation process requires the trustees to decide key issues such as the strength of the employer's covenant and the assumptions to be used in valuing the scheme. This can often be difficult given the interplay with the sponsoring employers, and potential conflicts of interest where directors of the employer are also appointed as trustees of the scheme.
For sponsoring employers, the valuation process is often of vital importance as it has the power to impact upon company cash flow and general finances going forward. The exercise is subject to statutory deadlines and the approval of The Pensions Regulator, which means that it needs to be managed to ensure that agreement on the funding issues is reached within approved timescales.
Pension Partners is able to assist the trustees and the sponsoring employers of schemes undergoing the actuarial process by:
- advising in respect of the duties of the various parties under the governing documentation of the scheme
- managing the negotiation process between the sponsoring employers and trustees to ensure timescales are met
- advising in respect of contingent assets
- liaising (where required) with The Pensions Regulator regarding the process