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You are here: BAILII >> Databases >> United Kingdom Statutory Instruments >> The Pension Protection Fund (Closed Schemes) Regulations 2007 No. 865 URL: http://www.bailii.org/uk/legis/num_reg/2007/20070865.html

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"the 1995 Act" means the Pensions Act 1995[3];

"the Act" means the Pensions Act 2004[4] (unless the context otherwise requires, any reference to a numbered section being to a section so numbered in that Act);

"the appropriate person" means the actuary as defined in section 156(6) (valuations of closed schemes);

"the effective date" for the purposes of a section 156 valuation, means the date by reference to which the assets were valued and the full scheme liabilities and the protected liabilities were calculated;

"closed scheme" and "closed section" shall be construed in accordance with section 155 (treatment of closed schemes);

"section 156 valuation" means an actuarial valuation under that section; and

"segregated scheme" means a multi-employer scheme which is divided into two or more sections where—

(a) any contributions payable to the scheme by an employer in relation to the scheme or by a member are allocated to that employer's or that member's section; and

(b) a specified proportion of the assets of the scheme is attributable to each section of the scheme and cannot be used for the purposes of any other section.

    (3) In these Regulations, in the case of a scheme which is a segregated scheme, where these Regulations apply to a section of a scheme which is for the purposes of Part 2 of the Act a closed section, for "closed scheme" and "scheme" substitute "closed section" and "section".

Applications and determination notices under section 153
     2. —(1) An application to the Board for the purposes of section 153(2) (closed schemes) shall be in writing and shall contain the following information—

(a) a description of the type or purpose of the application;

(b) the date on which the application is made;

(c) where the application is made in respect of a scheme, the name, address and pension scheme registration number of that scheme;

(d) where the application is made in respect of a section of a segregated scheme—


(i) the name, address and pension scheme registration number of that scheme; and

(ii) the name of the section;



(e) a description by the trustees or managers of the scheme of the steps they have taken to obtain a full buy-out quotation in respect of that scheme; and—



(i) the names and addresses of any persons they have approached for that purpose; and

(ii) the date on which any such approach was made; and



(f) where the Board does not already have the information, the name and address of each of the trustees or managers of that scheme.

    (2) An application to the Board for the purposes of section 153 shall be accompanied by evidence in the following form—

(a) a copy of any request made by the trustees or managers of the scheme in respect of which the application is made for a full buy-out quotation in respect of that scheme; and

(b) a copy of any refusal given to those trustees or managers in response to such a request.

    (3) A determination notice issued by the Board under section 153(6) shall be in writing and shall contain the following information—

(a) the name or type of notice issued;

(b) the date on which the notice is issued;

(c) where the notice is issued in respect of a scheme, the name, address and pension scheme registration number of that scheme;

(d) where the notice is issued in respect of a section of a segregated scheme—


(i) the name, address and pension scheme registration number of that scheme; and

(ii) the name of the section;



(e) the Board's determination to authorise or not to authorise the scheme to continue as a closed scheme; and

(f) where the Board has authorised the scheme to continue as a closed scheme, an explanation of the provisions of—



(i) section 155 in so far as they will operate while the scheme is a closed scheme;

(ii) section 156 in so far as they will operate while that scheme is a closed scheme; and

(iii) section 157 (applications and notifications where closed schemes have insufficient assets) in so far as they will operate if at any time the trustees or managers of that scheme while it is a closed scheme become aware that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme.

Obtaining of actuarial valuations of closed schemes
     3. —(1) In this regulation—

"the determination date" means the date immediately after—

(a) the expiry of the period within which the issue of the determination notice may be reviewed by virtue of Chapter 6 of Part 2 of the Act (reviews, appeals and maladministration); or

(b) if the issue of the notice is so reviewed—


(i) the review and any reconsideration;

(ii) any reference to the PPF Ombudsman in respect of the issue of the notice; and

(iii) any appeal against his determination or directions,



has been finally disposed of and the notice has not been revoked, varied or substituted;

"the relevant period" is the period of three years beginning immediately after the relevant time of the actuarial valuation of the scheme under section 143 (Board's obligation to obtain valuation of assets and protected liabilities);

"the relevant time" shall be construed in accordance with section 143(11)(c); and

"section 143 valuation" means an actuarial valuation under that section.

    (2) The effective date of the first section 156 valuation shall—

(a) be within the relevant period; or

(b) where the determination date did not fall within the relevant period, be within the period of 15 months beginning on the determination date.

    (3) Any subsequent section 156 valuation shall have an effective date which is not more than three years after the effective date of the previous section 156 valuation.

    (4) The trustees or managers of a closed scheme shall obtain any section 156 valuation of the scheme within the period of 15 months after its effective date.

Valuation of the assets and liabilities of closed schemes
     4. For the purposes of section 156—

(a) the assets, the full scheme liabilities and the protected liabilities in relation to a closed scheme; and

(b) their value or amount,

shall be determined, calculated and verified in accordance with the provisions of the Schedule.

Prescribed qualifications for the purposes of section 156
     5. For the purposes of the definition of "the actuary" contained in section 156(6), a person with prescribed qualifications is—

(a) a fellow of the Faculty of Actuaries[5]; or

(b) a fellow of the Institute of Actuaries[6].

Applications and notifications where closed schemes have insufficient assets
     6. —(1) Where the trustees or managers of a closed scheme are required under section 157(1) to make an application to the Board for it to assume responsibility for the scheme, they must do so within six months of the time when they become aware that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme.

    (2) An application to the Board for the purposes of section 157(1) shall be in writing and shall contain the following information—

(a) a description of the type or purpose of the application;

(b) the date on which the application is made;

(c) where the application is made in respect of a scheme, the name, address and pension scheme registration number of that scheme;

(d) where the application is made in respect of a section of a segregated scheme—


(i) the name, address and pension scheme registration number of that scheme; and

(ii) the name of the section;



(e) a statement by the trustees or managers of the scheme in respect of which the application is made that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme and the date on which they became so aware;

(f) a statement by the trustees or managers of the scheme in respect of which the application is made whether or not they obtained advice from the appropriate person before they became aware that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme;

(g) a statement by the trustees or managers of the scheme in respect of which the application is made of—



(i) the value of the assets of the scheme; and

(ii) the amount of the protected liabilities in relation to the scheme; and



(h) where the Board does not already have the information, the name and address of each of the trustees or managers of that scheme.

    (3) Where the Regulator becomes aware that the value of the assets of a closed scheme is less than the amount of the protected liabilities in relation to that scheme, the notice which the Regulator must give to the Board under section 157(3) shall be in writing and shall contain the following information—

(a) the name or type of notice given;

(b) the date on which the notice is given;

(c) where the notice is given in respect of a scheme, the name, address and pension scheme registration number of that scheme;

(d) where the notice is given in respect of a section of a segregated scheme—


(i) the name, address and pension scheme registration number of that scheme; and

(ii) the name of the section;



(e) a statement by the Regulator that it has become aware that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme;

(f) the date on which the Regulator became aware that the value of the assets of the scheme is less than the amount of the protected liabilities in relation to the scheme; and

(g) where the Board does not already have the information, the name and address of each of the trustees or managers of that scheme.

    (4) Where the Board receives a notice from the Regulator to which paragraph (3) applies, the notice under section 157(4) which the Board must give to the trustees or managers of the scheme in question shall be in writing and shall contain the following information—

(a) the name or type of notice given;

(b) the date on which the notice is given;

(c) where the notice is given in respect of a scheme, the name, address and pension scheme registration number of that scheme;

(d) where the notice is given in respect of a section of a segregated scheme—


(i) the name, address and pension scheme registration number of that scheme; and

(ii) the name of the section;



(e) a statement that the Board received a notice from the Regulator under section 157(3), the effect of that notice and the date on which it was given by the Regulator;

(f) the address for communications at which the Board may be contacted in respect of the giving of the notice; and

(g) whether the notice given by the Board contains any information which is restricted information under section 197 (restricted information), and, if so, the nature of the restrictions.

Transitional provision for schemes with an assessment date before 1st April 2007
     7. —(1) In this regulation, "assessment date" means the date on which the assessment period in relation to a scheme or closed scheme, or (where there has been more than one such assessment period) the last one, began.

    (2) In the case of a scheme or closed scheme with an assessment date before 1st April 2007, these Regulations shall have effect until 31st December 2007 as if there were substituted for the definition of "relevant accounts" in paragraph 1 of the Schedule the following—

" "relevant accounts" means—
(a) audited accounts for the scheme which are prepared in respect of a period ending with the effective date;

(b) if none are so prepared, the latest such accounts which are available at the effective date; or

(c) if the appropriate person's opinion is that it is practicable to use them, the latest such accounts which are available on the date the appropriate person signs the section 156 valuation;".

Signed by authority of the Secretary of State for Work and Pensions.


James Purnell
Minister of State, Department for Work and Pensions

14th March 2007

"pension credit rights" has the meaning given by section 124(1) (interpretation of Part 1) of the 1995 Act[7];

"pre-6th April 1997 contract of insurance" means a contract of insurance that—

(a) falls within the definition of a relevant contract of insurance in section 161(8) (effect of Board assuming responsibility for a scheme);

(b) was taken out before 6th April 1997; and

(c) the trustees or managers are, or should reasonably be aware of;

"relevant accounts" for the purposes of identifying and valuing the assets of a scheme, means audited accounts for the scheme which—

(a) contain the information specified in Part 2 of this Schedule;

(b) show a true and fair value of—


(i) the financial transactions of the scheme during the period to which the accounts relate ("the accounting period");

(ii) the amount and disposition of the assets at the end of the accounting period; and

(iii) the liabilities of the scheme, other than the liabilities to pay pensions and benefits, after the end of the accounting period;



(c) include a report by the auditor in writing as to whether or not in his opinion the requirements of paragraphs (a) and (b) above are satisfied; and

(d) are prepared in respect of a period ending with the effective date of the valuation;

"restoration order" has the meaning given by section 52 (restoration orders where transactions at an undervalue); and

"section 75 debt" means so much of the amount treated by section 75 of the 1995 Act[8] (deficiencies in the assets) as a debt due from the employer to the trustees or managers at the applicable time.

     2. There shall be excluded from the value of the closed scheme's assets—

(a) any amounts treated as a debt due to the trustees or managers which are unlikely to be recouped without disproportionate cost or unlikely to be recovered within a reasonable time; and

(b) an amount in respect of the value of any pre-6th April 1997 contract of insurance if—


(i) the trustees or managers have taken all reasonable steps to obtain information concerning that contract of insurance (whether by searching the records of the scheme or otherwise); and

(ii) the information they provide concerning that contract of insurance is insufficient, in the opinion of the appropriate person, to conduct a valuation.

     3. Subject to paragraph 6(3) and (4), where the Regulator issues a contribution notice or a financial support direction or makes a restoration order in relation to a scheme prior to the effective date of the valuation, any amount due under such a notice, direction or order shall be regarded as an asset of the scheme.

     4. Subject to paragraphs 2 and 6, in determining the value of the assets of a closed scheme for the purposes of a section 156 valuation, the appropriate person shall adopt the value given of the assets of the scheme stated in the relevant accounts and that value shall be taken to be the value of those assets at the effective date.

     5. —(1) Subject to paragraph 6, in the case of protected liabilities[9] the amount of a protected liability shall be the estimated cost of securing scheme benefits calculated in accordance with Schedule 7 to the Act (pension compensation provisions) to the member by means of an annuity purchased at the market rate at the effective date.

    (2) Where paragraph 2(b) applies, the amount representing the value of a protected liability in respect of the benefits secured by a pre-6th April 1997 contract of insurance shall be excluded from the valuation of the scheme's protected liabilities.

     6. —(1) For the purposes of a section 156 valuation, where for the purpose of giving effect to a pension sharing order or provision, arrangements are being made by the closed scheme for the transfer from it of any pension credit rights, until such time as the trustees or managers of the scheme to which the transfer is being made ("the receiving scheme") have received assets of the full amount agreed by them as consideration for the transfer, it shall be assumed—

(a) that the rights have not been transferred; and

(b) that any assets transferred in respect of the transfer of those rights are assets of the scheme making the transfer and not of the receiving scheme.

    (2) For the purposes of a section 156 valuation, in the case of a pre-6th April 1997 contract of insurance, the value shall be—

(a) the amount of the liability secured where the contract of insurance falls within the definition of a relevant contract of insurance in section 161(8); or where this is not the case either—

(b) the surrender value of the contract of insurance; or

(c) where it appears to the appropriate person that the surrender value of the contract of insurance does not accurately reflect the actual value at the effective date, then he shall adopt such a value as appears to him to be appropriate.

    (3) In the case of an asset to which paragraph 3 applies, the appropriate person shall adopt as the value of the asset the amount due to the closed scheme given in the notice, direction or order.

    (4) For the purposes of a section 156 valuation—

(a) where the appropriate person, in accordance with guidance issued by the Board under section 156(3), holds the opinion that any section 75 debt falling due to the closed scheme will be recouped in the future, then he shall treat the proportion of the section 75 debt that he believes will be recovered as an asset of the scheme;

(b) where an amount is due under a contribution notice, a financial support direction or a restoration order, and—


(i) a proportion of the amount due has been recouped before the effective date; and

(ii) the appropriate person, in accordance with any guidance issued by the Board in accordance with section 156(3), holds the opinion that no further payments due under the notice, direction or order will be recouped by the closed scheme,



the appropriate person shall adjust the value of the asset contained in the notice, direction or order to the value recouped by the trustees or managers of the closed scheme before the effective date.

(c) if the appropriate person—



(i) has been given notice; or

(ii) holds the opinion,



that the value of any asset set out in the relevant accounts, that is not excluded from the actuarial valuation, is substantially different at the effective date from that set out in the relevant accounts, then he shall adjust the value of the asset to the market value of the asset at the effective date; or

(d) where the appropriate person—



(i) has been given notice; or

(ii) holds the opinion,



in accordance with any guidance issued by the Board in accordance with section 156(3), that there exists an asset of the scheme which is not listed in the relevant accounts, and which is not excluded from the actuarial valuation, then he shall adopt such a value for the asset as he considers appropriate.

    (5) The appropriate person shall not make an adjustment to the value of an interest in real property unless the adjustment reflects a more recent valuation given by a chartered surveyor in accordance with any relevant practice statements and guidance issued by the Royal Institution of Chartered Surveyors[10] current on the date the valuation is signed.

     7. A section 156 valuation shall be verified by the Board if it is satisfied that the valuation was prepared in accordance with these Regulations and any guidance issued by the Board in accordance with section 156(3).

a note that paragraphs (a) and (b) apply must be included in the statement, but that entry need not include the market value or an estimate of value of those assets.

     3. Where any assets or liabilities are denominated in currencies other than sterling, a conversion of those assets into sterling and an explanation of the basis on which they have been converted.

     4. Particulars of any investment (other than in UK Government securities) in which more than 5 per cent. of the total value of the net assets of the scheme is invested, and if any such investment is an insurance policy, a statement of its main characteristics.

     5. Where the scheme has employer-related investments, within the meaning of section 40(2) of the 1995 Act[11] (restriction on employer-related investments), a statement—

(a) as to the percentage of the scheme's resources invested in such investments at the end of the accounting period; and

(b) if that percentage exceeds 5 per cent., as to the percentage of the scheme's resources which are investments to which regulation 13 of the Occupational Pension Schemes (Investment) Regulations 2005[12] (investments to which restrictions do not apply) applies.

     6. In respect of every other amount shown in the accounts other than the amounts referred to in paragraph 7, a statement of the corresponding amount for the scheme year previous to the accounting period, except in a case where regulation 2 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996[13] (requirement for trustees or managers to obtain documents) is complied with by the trustees or managers of a scheme for the first time.

     7. The total amount of the purchases and the total amount of the sales of investments during the accounting period.

     8. A statement whether the accounts have been prepared in accordance with the Statement of Recommended Practice, the guidelines ("Financial Reports of Pension Schemes") published by the Pensions Research Accountants Group[14] or another organisation approved for this purpose by the Accounting Standards Board[15], current at the end of the accounting period and, if not, an indication of where there are any material departures from those guidelines.

[2] See section 317 of the Pensions Act 2004 ("the Act"), which provides that the Secretary of State must consult such persons as he considers appropriate before making regulations by virtue of the provisions of that Act (other than Part 8). This duty does not apply where regulations are made before the end of six months beginning with the coming into force of the provisions of that Act by virtue of which the regulations are made.back

[3] 1995 c.26.back

[4] Part 2 of the Act is modified in its application to multi-employer schemes by the Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (S.I. 2005/441) and amended by S.I. 2005/993 and 2113 and 2006/566.back

[5] The Faculty of Actuaries can be contacted at Faculty of Actuaries, MacLaurin House, 18 Dublin Street, Edinburgh, EH1 3PP.back

[6] The Institute of Actuaries can be contacted at Institute of Actuaries, Staple Inn Hall, High Holborn, London, WC1V 7QJ.back

[7] 1995 c.26. The definitions of "pension credit", "pension credit member" and "pension credit rights" were inserted by section 84(1) of, and paragraphs 43 and 61(1) and (3) of Schedule 12 to, the Welfare Reform and Pensions Act 1999 (c.30).back

[8] Section 75 is amended by section 271 of the Act, and is modified in its application to multi-employer schemes by the Occupational Pension Schemes (Employer Debt) Regulations 2005 (S.I. 2005/678), amended by S.I. 2005/2224.back

[9] The term "protected liabilities" is defined in section 131(1) of the Act (protected liabilities).back

[10] The Royal Institution of Chartered Surveyors can be contacted at RICS Contact Centre, Surveyor Court, Westwood Way, Coventry, CV4 8JE.back

[11] Section 40 was amended by section 319(1) of, and paragraph 51 of Schedule 12 to, the Pensions Act 2004 and by S.I. 2001/3649 and 2004/355.back

[12] S.I. 2005/3378. Regulation 12 was amended by S.I. 2006/778.back

[13] S.I. 1996/1975; the relevant amending instruments are S.I. 2000/833, 3198, 2005/2426 and 2006/467.back

[14] Copies of this guidance can be obtained from Croner CCH Group Limited, 145 London Road, Kingston-upon-Thames, Surrey, KT2 6SR.back

[15] The Accounting Standards Board can be contacted at 5th Floor, Aldwych House, 71-91 Aldwych, London, WC2B 4HN.back

 © Crown copyright 2007