Download - The Financial Assistance Scheme VERSION GT5 pensioner assets tab: overview ... How to complete the validation template: overview ... Actuary FAS Valuation Actuary Validation validation

Issued August 2012 – 1 – Version GT5

Guide to validation template

The Financial Assistance Scheme VERSION GT5


Guide to validation template

Contents

Overview of the Reg 22 Valuation Process ............................................................. 3This Guide and other reference material ................................................................. 4Getting Started ........................................................................................................ 6Milestones during the valuation process ................................................................. 8How to complete the validation template: overview ................................................ 9How to complete the validation template: in detail for each tab ............................ 10Priority order tab: overview ................................................................................... 10Priority order: in detail ........................................................................................... 11Assets tab: overview ............................................................................................. 13Beneficiary numbers tab: overview ....................................................................... 14Basis tab: overview ............................................................................................... 15Basis tab: in detail ................................................................................................. 15Valuation summary tab: overview ......................................................................... 17Valuation summary tab: in detail ........................................................................... 18Category 1, 2 and 3 data tabs: overview ............................................................... 19Category 1 data tab: in detail ................................................................................ 22Category 2 data tab: in detail ................................................................................ 26Category 3 data tab: in detail ................................................................................ 30Insured pensioner assets tab: overview ................................................................ 33Insured pensioner assets tab: in detail .................................................................. 34Insured non-pensioner assets tab: overview ......................................................... 36Insured non-pensioner assets tab: in detail........................................................... 37Individual results tab: overview ............................................................................. 39Individual results tab: in detail ............................................................................... 40Individual results – annuities tab: overview ........................................................... 53Individual results – annuities tab: in detail ............................................................. 54Validation tab: overview ........................................................................................ 57Appendix 1: Glossary ............................................................................................ 59Appendix 2: Annuities ........................................................................................... 62Appendix 3: Legislation and Compliance .............................................................. 69


Overview of the Reg 22 Valuation Process


This Guide and other reference material Please refer to the Glossary in Appendix 1 for the definitions of highlighted terms used throughout this document. This Guide has been produced by the Financial Assistance Scheme (“FAS”) to set out details of how the FAS Valuation must be provided by the FAS Valuation Actuary. In addition the FAS Valuation Actuary should refer to and familiarise themselves with the information below which can be found via the PPF website at: www.pensionprotectionfund.org.uk/FAS/info_pensions_professionals/

Documents prepared by the DWP:

Asset Share guidance (Guidance on Method & Assumptions to use when undertaking a valuation under Reg 22 of the Financial Assistance Scheme Regulations 2005)

Underpin benefits guidance (Appendix to the Guidance on Method &

Assumptions to use when undertaking a valuation under Reg 22 of the Financial Assistance Scheme Regulations 2005)

Example calculations for a valuation for relevant FAS qualifying

schemes.

Accounts guidance (Information on the preparation of relevant accounts and guidance for actuaries to value particular assets to support FAS valuations)

Guidance to assist schemes to produced Expected Pension data in a

way that ensures Financial Assistance Scheme payments are calculated on an equalised basis

These can be accessed directly at: http://www.dwp.gov.uk/other-specialists/financial-assistance-scheme/fas-guidance/

Other Information provided by the Financial Assistance Scheme:

FAQs on the Validation Template

http://www.pensionprotectionfund.org.uk/FAS/info_pensions_professionals/Pages/FASValidationTemplate_FAQs.aspx


Financial Assistance Scheme – S1 Guidance

http://www.pensionprotectionfund.org.uk/DocumentLibrary/Documents/FAS_S1_Guidance.pdf


Getting Started

1. All outstanding data issues should be resolved before the valuation is commissioned. The FAS Valuation Actuary should discuss any issues with the scheme’s trustees and administrators in the first instance. The data submitted on the validation template must be consistent with the S1 data as this will be reviewed (and queried if inconsistent) later in the valuation process.

2. The FAS Valuation Actuary should contact FAS immediately if s/he believes

that information in the Valuation Commissioning Letter about the date of wind up and/or whether the Employer was solvent or insolvent is incorrect as these points affect the Reg 22 Valuation.

3. At any point in the process, before or after the valuation is commissioned, the FAS Valuation Actuary should contact the scheme’s FAS Actuarial Contact if s/he has any concerns or queries about the valuation.

4. The above Process Map shows indicative timescales. Actual timescales will reflect the scheme’s size and complexity and deadlines will be agreed by the FAS Actuarial Contact and the FAS Valuation Actuary.

5. The validation template is an Excel spreadsheet which you may download

from the PPF website. The FAS Valuation Actuary should submit the Reg 22 Valuation to FAS by completing this template and more detail on how to do this is contained in the next section.

6. The validation template on the PPF website is only suitable if the scheme’s wind up date is between 6 April 1997 and 5 April 2005. If the scheme’s wind up date is before or after these dates, please contact your FAS Actuarial Contact for a slightly different version of the template.

7. The validation template should be signed off by the FAS Valuation Actuary.

8. The validation template (and a signed copy of the audited accounts when

available) should be sent to the FAS Scheme Manager by the FAS Valuation Actuary or by the trustees or managers of the scheme. Transfer of information must be done in a secure manner via Repliweb. (Please contact your FAS Actuarial Contact for further details if needed.)

9. Once the FAS Valuation Actuary has submitted the Reg 22 Valuation, your

FAS Actuarial Contact will arrange for independent global checks to be carried out before the Reg 22 Valuation is approved by the FAS Scheme Manager.

10. Once the FAS Scheme Manager has approved the valuation then s/he will

provide an extract from the valuation to the scheme’s trustees and the trustees will have an opportunity to review the contents.


11. Table showing template elements to complete for your first draft valuation when audited accounts are not yet available:

Tab Elements to complete Priority order All except the non-statutory priority orders if these

liabilities have not been determined. Leave “Do scheme assets exceed liabilities on statutory basis” as “N” and, where appropriate, indicate that only liabilities are being submitted using the drop down field provided.

Assets Unless audited accounts are already available as at the scheme’s Calculation Date, the Assets tab does not need to be completed in the first draft unless annuity policies are included in the valuation. If annuity policies are included then approximate estimates of “Asset figure in accounts”, “Benefit payments to members since wind up” and any other material adjustments should be completed.

Beneficiary numbers

All except the “Beneficiary Reconciliation between Valuation and Accounts” section (unless the audited accounts are available in which case this should be completed too).

Basis All except the “Assumptions for non-statutory priority orders” sections if this part of the calculation has not been determined.

Valuation summary

At least sections 3-10, 12, 14, 22, and 23. (Any remaining sections should be completed in the second draft.)

Category 1 data All except “Total Buyout liability”, except if non-statutory priority classes have been determined and liabilities calculated.

Category 2 data All except “Total Buyout liability” except if non-statutory priority classes have been determined and liabilities calculated.

Category 3 data All except “Total Buyout liability” except if non-statutory priority classes have been determined and liabilities calculated.

Insured pensioner assets

All (if applicable).

Insured non-pensioner assets

All (if applicable).

Individual results All. (NB additional liabilities in later classes may need adding once accounts are available if assets exceed the liabilities initially calculated).

Individual results

–annuities

Columns A-I (if applicable).

Validation All (if applicable).


Milestones during the valuation process 12. Table showing when (and how) to take action when certain cases apply:

Event When to take action and what action to take Scheme has assets that are greater than the liabilities on a statutory basis

If it is clear that the assets are greater than the liabilities on a statutory basis before the audited assets are available then the FAS Valuation Actuary should discuss this with the FAS Actuarial Contact at that point. Otherwise, this discussion should happen when submitting the draft of the valuation where asset information is first completed in full. The Priority Order tab should have the indicator for assets greater than liabilities changed to “Y”. Extra priority classes should be created to use the surplus assets. The assets should be applied in line with the priority orders set out in the Trust Deed and Rules for the scheme. If instruction on the application of the scheme’s priority order rule is needed from the trustees, please obtain this instruction first. See section 3, paragraph 10-11 of the guidance. Liabilities should be calculated for the extra priority class(es) and the buyout liabilities column should be filled in on the Category 1-3 tabs where relevant.

FAS Valuation Actuary anticipates that certain statutory or non-statutory priority classes will not be covered by the assets

It is not necessary to calculate or report the liabilities in those priority classes. Liabilities of zero should be recorded in the relevant parts of the template and a note added to the Valuation summary tab to explain why these classes of liabilities have not been calculated. If the audited accounts subsequently show that there is some asset coverage in these priority classes, then these liabilities will need to be calculated and reported.

Data reconciliation No action is needed until the FAS Actuarial Contact contacts the FAS Valuation Actuary with queries about the reconciliation between the S1 data and the valuation. The reconciliation usually takes place after the second draft template is received by FAS, but can be earlier than this. The FAS Valuation Actuary should be prepared to answer any queries within a week, to ensure that resolving these queries does not hold up transfer of the scheme to FAS.

Dead members If a dead member has been overpaid and therefore has a negative Asset Share then, in the final valuation, this member will need to have nil liabilities, nil assets and no Interim payments information. In earlier valuation drafts,


please show the member’s Asset Share as being negative, and include Interim payments for the member. When the FAS Actuarial Contact is happy with the calculation of the liabilities for all members and the valuation is ready to be finalised, they will instruct you to make the final adjustments to the valuation. This may involve setting the liabilities for some dead members to zero, as well as their Interim payments where the Asset Share is shown as being negative. This will set the Asset Share to nil. Further details are provided in Appendix 2 as changes may also be needed for annuitants. The FAS Valuation Actuary should not set the liabilities for dead members with negative assets shares to nil until told to do so by the FAS Actuarial Contact.

Annuitants (other than those where the policies are already in the members’ names)

No action is needed until the first valuation where asset information is completed in full. At this stage, the FAS Valuation Actuary should liaise with the FAS Actuarial Contact for assistance in deciding whether the policies are likely to be assigned or should transfer to FAS, and whether top-up annuities should be purchased. (Refer to Appendix 2 for more information on how to treat annuities.) The FAS Valuation Actuary may need to calculate 90% of Expected Pension for the members of the scheme. Guidance on how to calculate 90% of Expected Pension can be found at: http://www.pensionprotectionfund.org.uk/FAS/info_pensions_professionals/Pages/TechnicalBulletins.aspx .

How to complete the validation template: overview 13. The validation template spreadsheet is broken down into a number of

separate tabs, most or all of which will need to be completed during the valuation process, depending on the scheme’s circumstances.

14. Not all fields in the validation template need to be completed for every

scheme. The template is automatically formatted to indicate the fields which should be completed for a specific scheme, based on the basic data entered. Only grey fields should be completed.

15. The validation template performs simple global checks on the data and results

entered. These checks can be turned off while the template is being completed


and further details are provided under the Validation tab section of this guidance. Please ensure that when information is pasted into the spreadsheet that the paste values option in Excel is used so that validation operates correctly.

16. Where the values shown are not as expected, entries will show as red and error messages or warnings will appear. The presence of error messages and warnings does not necessarily mean that there is a problem with the figures entered. Instead it highlights that a more sophisticated check (e.g. to address the scheme’s benefit structure) or further explanation (e.g. if there is a non-uniform age profile) is needed. The FAS Valuation Actuary should provide more information on the Validation tab and/or copies of their checks to support the figures shown or they may wish to discuss this first with the FAS Actuarial Contact. There is no need to replicate the simplistic checks carried out by the template.

17. On receipt of the draft validation template the FAS Actuarial Contact carries out a second stage of more sophisticated checks and may then need to request more detailed information to validate the FAS Valuation Actuary’s figures.

18. As outlined in the process map, the valuation process may be completed in

stages. Once the statutory liability valuation is completed, sections of the Priority order, Beneficiary numbers, Basis, Valuation summary, Category 1 data, Category 2 data, Category 3 data, Insured pensioner assets, Insured non-pensioner assets, Individual results, Individual results – annuities, and Validation tabs can be completed and submitted. Full details are given in the table in paragraph 11. Once valuation of the assets is complete, the Assets tab can be completed and the remaining tabs updated as necessary. NB details of the assets will be required to be submitted in the first draft of the validation template if the audited accounts are available or if any annuities are included in the valuation.

19. All monetary amounts should be entered to the nearest pound.

How to complete the validation template: in detail for each tab This section takes each tab at a time and provides an overview of what is needed followed (where necessary) by more detail on the data entries required for completion of that tab.

Priority order tab: overview 20. The Priority order tab (rows 2-10) requests basic information about the

scheme’s wind up. Based on the information provided, the template will


automatically generate the statutory priority order for the scheme (rows 18-24). If the priority order generated is different to the order the FAS Valuation Actuary has been instructed to use by the trustees, they should raise this on the Valuation summary tab. Please contact the FAS Actuarial Contact as soon as you become aware that this is the case.

21. If the scheme’s assets exceed its liabilities on the statutory basis, further priority

classes will need to be generated, as per Section 3 of the Asset Share guidance (effectively topping up the value placed on the liabilities from MFR value to ‘buy out’ value where applicable. If the scheme is overfunded on buyout, further priority classes based on the scheme rules will need to be generated). These priority classes should be entered on the Priority order tab. It is expected that this part of the process cannot be completed until the valuation of assets has been completed.

22. The FAS Valuation Actuary should select the basis used (i.e. ‘MFR’, ‘buyout’

or ‘mixed’) in each of cells B42 onwards and enter the Adjusted Liability for each priority class in column C (Please enter zero if the liabilities in any statutory priority class are nil.) The template automatically calculates the coverage of each priority class in column D.

23. The correct basis applying to each category of liability will depend upon which

version of the Winding Up Regulations applies and in turn upon the date the scheme commenced winding-up. In some cases, the Winding Up Regulations require the use of the MFR basis with certain modifications. Wherever the MFR basis applies, Regulations 4(5)-4(8) of the Winding Up Regulations allow the FAS Valuation Actuary to adopt a basis which is not the standard MFR basis under certain circumstances. If the FAS Valuation Actuary has adopted this approach, they will need to confirm this in the Valuation summary tab of validation template and provide an explanation of the method used.

24. Winding up priorities are determined by reference to the Crystallisation Date.

For many schemes, this date will be the same as the Commencement Date. If you have concerns as to which is the correct date under either definition please contact your FAS Actuarial Contact.

Priority order: in detail

Data item When to complete How to complete Scheme name

Always Free text

Gilts matched-deferreds

Always

“Y” - If the last Statement of Investment Principles states that the trustees' policy is to meet all


liabilities in respect of deferred members from investments in gilt-edged securities, as defined in MFR Regulation 7(9),

“N” - Otherwise Date of wind up

Always dd/mm/yyyy as confirmed by trustees

Crystallisation Date

Always dd/mm/yyyy as confirmed by trustees

Calculation date

Always dd/mm/yyyy in Valuation Commissioning Letter

Employer solvency status at wind up

Always Solvent/Insolvent as discussed with trustees

Do scheme assets exceed liabilities on a statutory basis?

Always ”Y “- If asset figures are available and exceed the value of the scheme’s liabilities calculated on the statutory priority order basis.

“N” - otherwise Are you completing the liabilities only?

Always ”Y “- If asset figures are not yet available and only figures in relation to liabilities are being submitted.

“N” - If the entire template is being completed.

N.B. If “N” is entered then the Assets tab must be completed

Basis used Always

“MFR”, “Buyout” or “Mixed” See section 6 of the Asset Share guidance. “Mixed” is expected to only apply to AVCs and should be used where an MFR basis has been used for some beneficiaries and Buyout for others.


Assets tab: overview 25. The Assets tab requests the total asset figure in the scheme’s audited

accounts. It also requests details of any adjustments to this figure in order to calculate the final asset figure.

26. Adjustment cells should only be completed where an adjustment has been

made under the relevant section of this guidance or regulations referred to in the template. Deductions from the asset figure in the accounts (e.g. expenses to be paid) should be entered as negative figures. Additions to the asset figure in the accounts (e.g. benefits that have been paid) should be entered as positive figures.

27. Regulations 22 and 23 of the FAS Regulations list a number of adjustments

the FAS Valuation Actuary shall/may make to the value of the scheme’s assets in the accounts. Regulation 24 provides that the FAS Scheme Manager may instruct the FAS Valuation Actuary to adopt a particular value for an asset. If the FAS Valuation Actuary has made any such adjustments in cells B12 onwards under any of these Regulations, they should provide full details of such adjustments. If the adjustment does not fall under any of the specific sections of regulations listed, the FAS Valuation Actuary should also include a reference to the specific regulation under which the adjustment has been made and reference to any relevant section of guidance.

28. The expenses figure in cell B10 should be as agreed between the scheme’s

trustees and FAS. 29. The template will automatically calculate a final asset figure based on the asset

figure in the accounts and all adjustments made. The FAS Valuation Actuary should confirm on the Valuation summary tab that they agree with this figure.

30. In certain exceptional circumstances the FAS Scheme Manager may waive the

requirements to obtain audited accounts. In these circumstances “Y” should be entered in cell B5 and the value of assets used by the FAS Valuation Actuary should then be input as highlighted in the template and supporting commentary should be provided.

31. When annuities are included in the valuation, the FAS Valuation Actuary

should complete the Assets tab even when audited accounts are not yet available. A best estimate of the asset figure in the accounts, benefit payments made during wind up and any other material adjustments should be included. This can then be updated once accounts become available. This is to enable the FAS Scheme Manager to judge whether it is likely that annuity policies will need to be assigned to individuals, or whether top-up annuities will need to be bought.


Beneficiary numbers tab: overview 32. The Beneficiary numbers tab collects information on Beneficiary numbers,

broken down into different categories and reconciles the Beneficiary numbers between the audited accounts and the valuation. These categories are referred to as categories 1, 2 and 3 – see the Category 1, 2 and 3 data tabs overview below for an explanation of how to determine the category for a Beneficiary’s liabilities.

33. Dependants should be classed in the same category as the original member from whom their benefits derive. Thus the category 1 entry for ‘dependants at crystallisation’ will, in addition to those who were already dependants at crystallisation, also include dependants of category 1 members who were themselves alive at the Crystallisation Date but who have subsequently died.

34. The Beneficiary summary table shows the number of beneficiaries included in

the valuation, broken down into different categories. This should match the total number of individual records completed on the Individual results tab unless there are members with multiple periods of service. Such members should be included once on the Beneficiary numbers tab whereas in the Individual results tab they may be either split over multiple rows or combined into one row. Where there are no beneficiaries in a particular category, an input of zero should be entered.

35. To complete the reconciliation section the following information should be

provided:

Beneficiaries included in the valuation who have died prior to the Calculation Date and who have been excluded from the member summary in the accounts; and

Beneficiaries excluded from the valuation membership but who have been included in the member summary in the accounts. This could include Beneficiaries to whom annuity policies have been individually assigned or whose defined benefit liabilities are being discharged outside of the transfer to FAS.

36. If the result of the reconciliation indicates that there is a discrepancy between

the numbers of beneficiaries included in the valuation compared with the total shown in the accounts, please provide an explanation for the difference.


Basis tab: overview 37. The Basis tab sets out the financial and demographic assumptions used to

calculate the liabilities. 38. Assumptions used for statutory priority classes should all be completed. If the

valuation includes any annuity policies, assumptions for insured assets also need to be completed. Assumptions for non-statutory priority classes should only be completed where the scheme’s assets exceed the liabilities on the statutory wind up basis. Further details on the valuation of assets can be found in the Accounts guidance.

Category 2 and 3 are “Deferreds at Crystallisation Date”. Category 1 are “Pensioners / Dependants at Crystallisation Date”. “Insured assets” are always valued on the Buy out basis.

Basis tab: in detail

Data item When to complete How to complete Discount rate in deferment/payment

Always Please enter as a percentage

Mortality table/rating

Always Please select the appropriate values from the drop down list.

Proportion married Always

The proportion married assumption on the Buy out basis will depend on provisions for survivors in scheme rules (see below). Possible assumptions are set out in the Asset Share guidance Section 4.

Expenses Always Please select the appropriate percentage from the drop down list. (MFR = 0%, Buy-out = 2%)

Do the scheme rules provide for a survivor’s pension to be paid to a surviving partner

Always

”Y” - If the scheme rules provide (including discretionary provision) for a survivor pension to be paid to an adult other than a legal spouse or civil partner ”N” - Otherwise


Data item When to complete How to complete

Deferred Revaluation Assumption

All schemes with liabilities in respect of deferred members

The descriptions of the assumptions correspond to those set out in Asset Share guidance Section 4

If an assumption used does not fall under any of the methods set out in the Asset Share guidance, please enter “Other” and provide further details on revaluation method

The assumption used should be based on the MFR or Buy out basis as appropriate

If the method is RPI/CPI Capped, please enter cap as a percentage

Once all assumptions have been entered, please enter “Not used” for the remaining descriptions.

Pension Increase Assumption

Always

The descriptions of the assumptions correspond to those set out in the Asset Share guidance Section 4

The assumption used should be based on the MFR or Buy out basis as appropriate

If an assumption used does not fall under any of the methods set out in the Asset Share guidance, please enter “Other” and provide further details on increase method

Please provide cap and/or floor as a percentage

Once all assumptions have been entered, please enter “Not used” for the remaining descriptions

MVAs used All schemes with benefits assessed on the MFR basis

Please enter the market value adjustments used as defined in the relevant version of GN27.


Valuation summary tab: overview 39. The Valuation summary tab confirms that various elements of the valuation

have been performed in line with relevant regulations and guidance. It also provides information which enables the FAS Scheme Manager to track the progress of the valuation.

40. As set out in the table in paragraph 11, only certain sections may need to be

completed for the first submission of the template. In such circumstances, the remainder can only be completed once audited asset figures are available.

41. If the FAS Valuation Actuary is aware that any aspect of the valuation has not

been prepared in line with the relevant regulations and guidance, they should contact their FAS Actuarial Contact to discuss the approach taken before they submit the validation template.

42. The FAS Valuation Actuary should be aware that putting his/her name in cell

E82 on the Valuation summary tab is an electronic signature and indicates that s/he takes responsibility for the entries in the draft validation template submitted.

43. The free text box at the end of the Valuation summary tab provides an

opportunity for the FAS Valuation Actuary to explain any other aspects of the valuation to facilitate the review by the FAS Scheme Manager.


Valuation summary tab: in detail

Data item When to

complete How to complete

3. Date

submitted

to the PPF

Always Please update every time you submit a

new draft to the PPF

4. Version of draft submitted

Always

Enter text in the format X.Y X=1 for a draft where not all

elements have been completed (e.g. if asset data unavailable).

If all elements have been completed X=2

To keep track of multiple submissions, use Y to indicate what draft number it is.

For example, the first draft submitted will always be 1.1 unless it includes asset information. The first draft that includes asset information will be 2.1.When the final version is submitted, please enter “Final”

7 & 8 – Version of guidance and assumptions used

Always GA1.2 should be used by all schemes whose valuation had not been approved by 25 October 2011.

9. Version of template used

Always

The latest version of the template is version T4, released in August 2012. The latest version will always be available on the FAS section of the PPF website: www.pensionprotectionfund.org.uk/FAS/info_pensions_professionals/Pages/ FASValuationGuidance.aspx


Category 1, 2 and 3 data tabs: overview 44. The tabs for Category 1 data, Category 2 data and Category 3 data collect

summary information on the liabilities for beneficiaries in each of those categories.

45. Category 1 liabilities relate to pensioner members and dependants who were entitled to receive payments from the scheme at the Crystallisation Date and also the survivors of those category 1 members who have died during the wind up period( Dependants should be classed as the same category as the original member from whom their benefits derive). Category 2 liabilities relate to benefits for members who became eligible for scheme payments between the Crystallisation Date and the Calculation Date, and also the survivors of Category 2 members who died during the wind up period. Category 3 beneficiaries are not yet eligible for scheme payments at the Calculation Date. Members who died in deferment should be included in Category 2, not Category 3 because their only liabilities are past liabilities.

46. When deciding in which category/ies a beneficiary’s liabilities fall(s), it is

important to note that the Asset Share guidance provides that member options exercised during wind up are ignored. See section 2 of the Asset Share guidance for further details.

47. As outlined in the Asset Share guidance, Dubery members will have one

Asset Share calculated, however their liabilities should be split and allocated to the appropriate categories. Such members will therefore appear in more than one category tab.

48. The total liability needs to be split into different benefit tranches in the Category

1-3 tabs in order to facilitate independent global checks of the liability figures. For example, liabilities will be split by gender so that sex-specific factors can be applied. This will also enable the FAS Actuarial Contact to validate liabilities in different priority classes.

49. As a first step in this independent checking process, the validation template incorporates simple global checks in hidden cells. Where the values shown are not as expected, entries will show as red and error messages will appear. The presence of error messages and warnings does not necessarily mean that there is a problem with the FAS Valuation Actuary’s figures. Instead it highlights that a more sophisticated check (e.g. to address the scheme’s benefit structure) or an explanation (e.g. non-uniform age profile) is needed. The FAS Valuation Actuary should review his/her checks of any ‘red’ liabilities and provide information on the Validation tab and/or copies of his/her own checks to support the figures shown. It is not however necessary to second guess the validation template’s simplistic checks or to replicate their answers.

50. On receipt of the draft validation template, the FAS Actuarial Contact carries

out a second stage of more sophisticated checks.


51. The scheme liabilities on each of the Category 1-3 tabs should be split according to the following sub-categories:

non-surrenderable1 contract of insurance (Category 1);

status of member at crystallisation date (pensioner, adult dependant etc) (Categories 1 & 2);

gender of member (Categories 1, 2 & 3);

increases on pension in payment (Categories 1, 2 & 3);

contracted-out and non-contracted-out liabilities, if the scheme commenced wind up prior to 10 May 2004 (Categories 2 & 3);

Normal Pension Age (NPA) or MFR pension age if on MFR basis (Category 3) and

increases on pension in payment (Categories 1,2 & 3). 52. If a Beneficiary has more than one type of pension increase applying to their

benefits, they will be included in the liabilities for more than one row. For example, a Beneficiary with pre- and post-1988 GMP and pre-1997 excess pension may have their liabilities split over three different rows.

53. As described in the Asset Share guidance, in order to meet statutory

equalisation requirements, the Asset Share for each Beneficiary must be equalised. Pension figures provided in these tabs should be post-equalisation pension figures. The liability figures in this tab should be consistent with the pension figures after allowance for equalisation. For GMP equalisation, Sections 2 and 3 of the Asset Share guidance describe the approach to take with the liability calculations so that members are treated as being of the sex that maximises their Asset Share. This can in certain circumstances be different from the sex which maximises their pension entitlement, in the S1 data. The pension figures entered on the Category tabs should be consistent with the liability figures calculated.

54. When the validation functionality is turned on average immediate or deferred

annuity rates will be calculated based on the information input. These annuities will be used to validate the liability amounts provided. The deferred “annuity rates” in the Category 3 tab include revaluation, discounting an approximate allowance for death in deferment and any MFR switching factor and MVA applicable. If this validation is not passed a warning message will be shown. In these circumstances the FAS Valuation Actuary should provide an explanation on the Validation tab of why the average annuity rate is not representative of the sub-category.

55. If the data is very heterogeneous (e.g. wide range of ages) it would be helpful if

the FAS Valuation Actuary could break the sub-categories down further.

1 Non-surrenderable is as defined in the Winding Up Regulations i.e. it may not be surrendered or the amount payable on surrender does not exceed the liability secured by the contract


56. For complex benefit structures it may be helpful for the FAS Valuation Actuary to include additional lines at the bottom of the Category 1-3 tabs to show the various sub-category entries relating to one particular member. This should be explained (e.g. in the Validation tab) to avoid confusion when the FAS Scheme Manager validates the liabilities. If you think this approach would be helpful, please discuss with your FAS Actuarial Contact.

57. When the MFR basis is used, benefits will be valued as being payable from the

MFR pension age. The deferred pension amount shown on the Category 3 data tab should therefore include any early or late retirement factors applied to adjust tranches payable from a different age.

58. Common reasons for warnings occurring are as follows:

1) Actual average fixed rate GMP for a tranche not being 6% - please provide

details of the appropriate rate and ensure this would resolve the validation warning.

2) Late Retirement Factors (excess and GMP) 3) GMP step amounts payable from 65.

59. Where schemes have equalised for GMPs using DWP’s method the

Category 3 data tab entries for males will typically show the equivalent female GMP. Depending on the basis used to value the liabilities, in particular the use of a single MFR pension age of 65, it is expected that the validation template will provide a warning message. In such cases the FAS Valuation Actuary should provide appropriate details in the Validation tab – this may include details of the late retirement factor applied and the average rate of GMP revaluation in deferment, if applicable.

60. When representing a GMP step-up, the GMP step-up pension may be valued separately with the liabilities allocated to the appropriate tranches on the Category 1-3 tabs. Alternatively, the GMP step-up pension may be included within the liability for a given tranche of pension. However, it should be made clear that this is the approach used. Please ensure that the pension amount provided is consistent with the liabilities provided for each tranche. We would encourage the provision of additional information within the Validation tab regarding the way in which you have represented a GMP step-up in the template. When representing a GMP step up we are happy to accept the method that is most convenient based on the way in which you have carried out your calculations.

61. No information should be provided on this tab in relation to AVC liabilities. 62. Please note there is no need to calculate liabilities where the FAS Valuation

Actuary anticipates that certain lower priority classes will not be covered. If this approach has been taken, please confirm this in the additional information section of the Valuation summary tab.


Category 1 data tab: in detail Data item When to complete How to complete

Non-surrenderable contract of insurance

Always

“Y” - If this tranche of benefits is backed by an annuity contract as defined by priority class 2 on the Priority order tab.

“N” - Otherwise

Status Always

Pen: Original member2 of scheme Dep-adult: Adult receiving survivor benefits following death of original scheme member. This includes those receiving survivor benefits at the date of wind up and those receiving survivor benefits following the death of a Category 1 pensioner after windup. Dep-child: Child receiving survivor benefits following death of original scheme member Dead: Member or dependant of a Category 1 pensioner who has died between date of wind up and the Calculation Date

Gender Always M-male F-female

Increase in payment rate type

Always

Enter a figure from 1-8 These numbers correspond to the numbers entered under “Increases in payment rate type” in the Pension Increase Assumption section of the Basis tab

2 An original member is someone who was a member of the scheme in their own right under the membership conditions of the scheme rules, as opposed to someone who receives/is due to receive benefits as a result of the death of an original member



Total scheme pension due at calculation date

Always

This is the sum of scheme pensions with entitlement to the specified increases in column E for the group of beneficiaries included in that row It is the pension the beneficiaries were eligible for under scheme rules at the Calculation Date (not the actual amount the member was being paid) If a State Scheme Premium has been or will be paid, it is the scheme pension excluding the GMP It is the member’s pension ignoring any options exercised after wind up A value of 0 should be added for all categories with status Dead.

Total contingent spouse’s pension at calculation date

Always

This is the sum of contingent pensions at Calculation Date for a spouse/civil partner/other adult survivor (depending on scheme rules) corresponding to the group of members in that row Please input 0 if no contingent benefits are payable It is a pension amount, not a percentage

Total scheme

pension due at date

of wind up

(pensioners) / date

of death of original

member

(dependants)

Always

This is the sum of scheme pensions with entitlement to the specified increases in column E for the group of beneficiaries included in that row It is the pension the beneficiaries were eligible for under scheme rules at the wind up date for pensioner beneficiaries or at the date of the original member’s death if the beneficiaries are dependants. This is not the actual amount the member was being paid eg ignores any reduction due to wind up If a State Scheme Premium has been or will be paid, it is the scheme pension excluding the GMP It is the member’s pension ignoring any options exercised after wind up

Number of beneficiaries

Always The number of beneficiaries included in each tranche



Average age (weighted)

All except deceased beneficiaries

The average age of the beneficiaries included in each tranche weighted by the total scheme pension due at the Calculation Date or by the liability. (Confirm which on Validation tab.) Ages should be rounded to 2 decimal places e.g. 65 and 2 months should be added as 65.17

Liability in respect of future level benefits

Always

This is the liability in relation to future payments, after the Calculation Date, of the benefits in that row/tranche It should exclude any increases due on those benefits. This is so that these liabilities can be matched up to different priority classes which distinguish between benefits due and increases on those benefits The priority class is for level benefits due at wind up date hence the liability is in relation to the level benefits due at date of wind up (rather than the benefits due at Calculation Date)

Level scheme benefits due from wind up to calculation date

Always

These are the level benefits which should have been paid under scheme rules from wind up to Calculation Date for that benefit tranche No increases should be included in this figure i.e. it will be equal to the initial pension which should have been in payment at wind up multiplied by payment period It is not the payments which were actually made to beneficiaries

Liability in respect of future increases

Always

This is the liability in relation to increases on future payments of the benefit tranche in that row It relates to liabilities for all increases above the level benefits due at the wind up date It will be equal to the total future liabilities less the liability in respect of future level benefits



Increases on scheme benefits due from wind up to calculation date

Always

These are the increases which should have been paid under scheme rules from wind up to Calculation Date for that benefit tranche It will be equal to total payments due less level scheme benefits due It is not the increases actually paid

Total buyout liability

When total scheme assets exceed total scheme statutory liabilities

This is the total future liability in relation to the tranche of benefits in that row It is calculated using the buyout basis set out in the Asset Share guidance It is in relation to benefits due after the Calculation Date only. Details of past liabilities are included in “Level scheme benefits due from wind up to calculation date” and “Increases on scheme benefits due from wind up to calculation date” and are the same irrespective of the basis used



Status Always

Pen: Original member3 of scheme Dep-adult: Adult receiving survivor benefits following death of original scheme member Dep-child: Child receiving survivor benefits following death of original scheme member Dead: Beneficiary who has died prior to Calculation Date.

Data in respect of contracted-out benefits

When the scheme has commenced wind up prior to 10/05/2004

”Y” - If this tranche relates to contracted-out benefits

“N” - Otherwise



Always


Total scheme pension due at calculation date

Always

This is the sum of scheme pensions with entitlement to the specified increases in column E for the group of beneficiaries included in that row It is the pension the beneficiaries were eligible for under scheme rules at the Calculation Date (not the actual amount the member was being paid). This amount should exclude any options exercised since wind up If a State Scheme Premium has been or will be paid, it is the scheme pension excluding the GMP It is the member’s pension ignoring any options exercised after wind up A value of 0 should be added for all categories with status Dead





Always

This is the sum of contingent pensions at the Calculation Date for a spouse/civil partner/other adult dependent (depending on scheme rules) corresponding to the group of members in that row Please input 0 if no contingent benefits are payable It is a pension amount, not a percentage

Total scheme

pension due at date

pension commenced

Always

This is the sum of scheme pensions with entitlement to the specified increases in column E for the group of beneficiaries included in that row It is the pension the beneficiaries were eligible for under scheme rules at the date their pension commenced (not the actual amount the member was being paid). This amount should exclude any options exercised since wind up If a State Scheme Premium has been or will be paid, it is the scheme pension excluding the GMP It is the member’s pension ignoring any options exercised after wind up

A value of 0 should be added for

all categories with status Dead Number of beneficiaries


Average age (weighted)

All except deceased beneficiaries

The average age of the beneficiaries included in each tranche weighted by the total scheme pension due at the Calculation Date or by the liability. (Confirm which on Validation tab.) Ages should be rounded to 2 decimal places e.g. 65 and 2 months should be added as 65.17




Always

This is the liability in relation to future payments, after the Calculation Date, of the benefits in that row/tranche It should exclude any future increases due on those benefits. This is so that these liabilities can be matched up to different priority classes which distinguish between benefits due and increases on those benefits The priority class is for level benefits due when payment commenced (ignoring options) hence the liability is in relation to the level benefits due at date pension commenced (rather than the benefits due at the Calculation Date).

Level scheme benefits due from wind up to calculation date

Always

These are the level benefits which should have been paid under scheme rules from wind up to Calculation Date for that benefit tranche No increases should be included in this figure i.e. it will be equal to the initial pension at the date payments should have commenced (ignoring options exercised since wind up) multiplied by payment period It is not the payments which were actually made to beneficiaries


Always

This is the liability in relation to increases on future payments of the benefit tranche in that row It relates to liabilities for all increases above the level benefits due at the date pension commenced It will be equal to the total future liabilities less the liability in respect of future level benefits It is not the increases actually paid



Increases on scheme benefits due from wind up to calculation date

Always

These are the increases which should have been paid under scheme rules from wind up to Calculation Date for that benefit tranche It will be equal to total payments due less level scheme benefits due



This is the total liability in relation to the tranche of benefits in that row It is calculated using the Buy out basis set out in the Asset Share guidance It is in relation to future benefits only. Details of past liabilities are included in “Level scheme benefits due from wind up to calculation date” and “Increases on scheme benefits due from wind up to calculation date” and are the same irrespective of the basis used




Tranche NPA/MFR pension age

Always

This is the normal pension age under scheme rules for this tranche of benefits If the MFR basis has been used, this should be the MFR pension age It is not limited by the FAS NRA minimum and maximum (60 and 65) If the normal or MFR pension age definition includes a part year, this should be rounded to 2 decimal places e.g. 62 and 8 months should be added as 62.67

Data in respect of contracted-out benefits

When the scheme has commenced wind up prior to 10/05/2004

”Y” - If this tranche relates to contracted-out benefits

“N” – Otherwise.


Always


Revaluation type Always

Enter a figure from 1-8 These numbers correspond to the numbers entered under “Revaluation type” in the Deferred Revaluation Assumption section of the Basis tab



Scheme deferred pension at calculation date

Always

This is the sum of scheme pensions eligible for the specified increases in deferment and payment for the group of beneficiaries included in that row It should be re-valued from date of leaving up to the Calculation Date It is the pension the members were eligible for under scheme rules at the Calculation Date If the MFR basis has been used amounts should be adjusted to include any early or late retirement factor applicable to the various tranches If a State Scheme Premium has been or will be paid, it is the scheme pension excluding the GMP It is the member’s pension after any cash commutation

Scheme accrued cash at calculation date

When the scheme rules state that cash is accrued in addition to the scheme pension

This refers to cash which accrues separately from pension Please provide details of the cash amount in a separate row to the scheme pension The amount should be re-valued up to Calculation Date If the MFR basis has been used amounts should be adjusted to include any early or late retirement factor applicable to the various tranches It will not have an increase in payment rate associated with it and cannot be in relation to contracted out benefits. It therefore only needs to be split by gender, NPA and revaluation code

Number of Beneficiaries


Average age All except deceased beneficiaries

The average age of the beneficiaries included in each tranche weighted by the total scheme pension due at the Calculation Date. Ages should be rounded to 2 decimal places e.g. 65 and 2 months should be added as 65.17



Average dependant’s benefit (DAR) as a proportion of member’s pension

For all categories in respect of scheme pension (rather than lump sum)

This is the average dependant’s benefit for all members in this benefit tranche It relates only to benefits paid to survivors on death after retirement It includes adult survivors only It is a percentage, not an amount If no benefits are payable, please enter 0%

Average dependant’s benefit (DID) as a proportion of member’s pension

Always

This is the average dependant’s benefit for all members in this benefit tranche It relates only to benefits paid to survivors on death before retirement It includes only adult, not child survivors It is a percentage, not an amount If no benefits are payable, please enter 0%

% of calculated liabilities to which equity MVA applies

If liabilities have been calculated on an MFR basis and the scheme is not gilts-matched

Percentage of the total future liabilities in that row (columns N & O) that have been adjusted by the equity MVA It is a percentage, not an amount, and should reflect the proportion of the liability prior to applying MVAs, to which the equity MVA is applied.


Always

This is the liability in relation to future payments of the benefit tranche in that row It should exclude any future increases in payment due on those benefits. This is so that these liabilities can be matched up to different priority classes which distinguish between benefits due and increases on those benefits


Always

This is the liability in relation to increases on future payments of the benefit tranche in that row It will be equal to the total future liabilities less the liability in respect of future level benefits



This is the total liability in relation to the tranche of benefits in that row It is calculated using the Buy out basis set out in the Asset Share guidance


Insured pensioner assets tab: overview 79. If the scheme has purchased annuities for pensioners or dependants and those

annuities have not been individually assigned, these policies are an asset of the scheme. As such, they need to be valued. They should be assessed on the Buy out basis set out in the Asset Share guidance, including the expense loading. The exception to this is annuity policies where the surrender value is greater than the liabilities which the policy covers. Such policies should be surrendered before the valuation begins. They will therefore be included as assets in the scheme’s audited accounts.

80. When annuity policies are to be valued the FAS synthetic buyout basis

should be used (see Section 4 of the Asset Share guidance). Further details on how to value annuity assets can be found in both the Asset Share and Accounts guidance.

81. Only policies which are assets of the scheme should be included here. Policies

in the names of individual beneficiaries are not assets of the scheme hence should not be valued. The exception to this will be when partial annuitants are included in the initial valuation to enable their Asset Share to be confirmed. Such assets should be removed from the valuation prior to the final valuation being submitted if these assets are not transferring to government. In addition, the liabilities in respect of such members should be set to zero.

82. This tab should be used for annuities which are in payment. If the annuity is not

yet being paid, it should be included in the Insured non-pensioner assets tab. 83. The total asset value needs to be split into different benefit tranches in order to

validate it – for example, results will be split by gender so that sex-specific factors can be applied.

84. Assets relating to annuities should be split according to the following categories:

status of Beneficiary at Calculation Date (pensioner, adult dependant etc);

gender of Beneficiary; and

rate of increases on pension in payment. 85. If a Beneficiary has more than one type of pension increase applying to their

annuity, they will be included in more than one row. 86. When the validation functionality is turned on average annuity rates will be

calculated based on the information input. These annuities will be used to validate the liability amounts provided. If this validation is not passed a warning message will be shown. In these circumstances the FAS Valuation Actuary should provide an explanation of why the average annuity rate is not representative of the category on the Validation tab.


Insured pensioner assets tab: in detail Data item When to complete How to complete

Status Always

Pen: Original member4 of scheme Dep-adult: Adult receiving survivor benefits following death of original scheme member Dep-child: Child receiving survivor benefits following death of original scheme member


Increase in payment rate code

Always

Enter a figure from 1-8 These numbers correspond to the numbers entered under “Increases in payment rate code” in the Pension Increase Assumption section of the Basis tab It is the increases awarded on the annuity, rather than that due under scheme rules (if this differs)

Total scheme pension at calculation date

Always

This is the sum of annuities receiving the specified increases in payment for the group of members included in that row It is the amount the members were eligible for from the annuity at the Calculation Date (not the amount under scheme rules, if this differs)


Always

This is the sum of contingent pensions for a spouse/civil partner/other adult dependent (depending on benefits due from the annuity) corresponding to the group of members in that row Please input 0 if no contingent benefits are payable It is a pension amount, not a percentage



Average age Always The average age of the beneficiaries included in each tranche weighted by the total scheme



pension due at the Calculation Date. Ages should be rounded to 2 decimal places e.g. 65 and 2 months should be added as 65.17

Assessed asset value

Always This is the asset figure based on the benefits due from the annuity for that group of beneficiaries


Insured non-pensioner assets tab: overview 87. If the scheme has purchased deferred annuities for beneficiaries and those

annuities have not been individually assigned, these policies are an asset of the scheme. As such, they need to be valued. They should be assessed on the Buy out basis set out in the Asset Share guidance, including the expense loading. The exception to this is annuity policies where the surrender value is greater than the liabilities which the policy covers. Such policies should be surrendered before the valuation begins. They will therefore be included as assets in the scheme’s audited accounts.

88. When annuity policies are to be valued the FAS synthetic buyout basis should

be used (see Section 4 of the Asset Share guidance). Further details on how to value annuity assets can be found in both the Asset Share and Accounts guidance.

89. Only policies which are assets of the scheme should be included here. Policies

in the names of individual beneficiaries are not assets of the scheme hence should not be valued. The exception to this will be when partial annuitants are included in the initial valuation to enable their Asset Share to be confirmed. Such assets should be removed from the valuation prior to the final valuation being submitted if these assets are not transferring to government. In addition, the liabilities in respect of such members should be set to zero.

90. This tab should be used for annuities which are not yet in payment. If the

annuity is currently being paid, it should be included in the Insured pensioner assets tab.

91. The total asset value needs to be split into different benefit tranches in order to

validate it – for example, results will be split by gender so that sex-specific factors can be applied.

92. Beneficiaries of annuities should be split according to the following categories:

gender of member;

Normal Pension Age (NPA);

revaluation rate in deferment; and

rate of increases on pension in payment. 93. If a Beneficiary has more than one type of pension increase or revaluation

applying to their annuity, they will be included in more than one row. 94. When the validation functionality is turned on average deferred annuity rates will

be calculated based on the information input. These annuities will be used to validate the liability amounts provided. If this validation is not passed a warning message will be shown. In these circumstances the FAS Valuation Actuary should provide an explanation of why the average annuity rate is not representative of the category on the Validation tab.


Insured non-pensioner assets tab: in detail Data item When to complete How to complete


Tranche NPA Always

This is the normal pension age at which the annuity will come into payment It is not limited by the FAS NRA minimum and maximum (60 and 65) If the normal pension age definition includes a part year, this should be rounded to 2 decimal places e.g. 62 and 8 months should be added as 62.67

Revaluation type Always

Enter a figure from 1-8 These numbers correspond to the numbers entered under “Revaluation type” in the Deferred Revaluation Assumption section of the Basis tab It is the increases awarded on the annuity, rather than that due under scheme rules (if this differs)

Increase in payment rate code

Always

Enter a figure from 1-8 These numbers correspond to the numbers entered under “Increases in payment rate code” in the Pension Increase Assumption section of the Basis tab It is the increases awarded on the annuity, rather than that due under scheme rules (if this differs)

Total scheme pension at calculation date

Always

This is the sum of annuities receiving the specified increases in payment for the group of beneficiaries included in that row It is the amount the members were eligible for from the annuity at the Calculation Date (not the amount under scheme rules, if this differs)





Average age Always

The average age of the beneficiaries included in each tranche weighted by the total scheme pension due at the Calculation Date Ages should be rounded to 2 decimal places e.g. 65 and 2 months should be added as 65.17

Average dependant’s benefit (DAR) as a proportion of member’s pension

For all categories in respect of scheme pension (rather than lump sum)

This is the average dependant’s benefit for all members in this benefit tranche It relates only to benefits paid to survivors on death after retirement It includes adult survivors only It is a percentage, not an amount If no benefits are payable, please enter 0%

Average dependant’s benefit (DID) as a proportion of member’s pension

Always

This is the average dependant’s benefit for all members in this benefit tranche It relates only to benefits paid to survivors on death before retirement It includes only adult, not child survivors It is a percentage, not an amount If no benefits are payable, please enter 0%

Assessed asset value Always This is the asset figure based on the benefits due from the annuity for that group of beneficiaries


Individual results tab: overview

95. Whereas the information on the Category 1-3 tabs is used only to facilitate the checking of the FAS Valuation by the FAS Actuarial contact, all of the information on the Individual results tab can directly impact the actual payments to be made by FAS to individual scheme members. Thus it is particularly important that this tab is completed correctly.

96. Once the FAS Actuarial contact is happy with most of the information

provided on the validation template, the Individual results tab is reconciled with the S1 data which has been provided to FAS by the Administrator. It is therefore vital that all parties are kept informed of any changes that are made to the data at all stages of the process. In particular, the FAS Valuation Actuary should liaise with the Administrator and ensure that the total scheme Interim payments (excluding any lump sums paid) is consistent with the “Total gross interim pension paid from later of wind up and pension commencement date to VCAL” on the “Member Transfer” tab of the S1 data.

97. Please take extra care to ensure that each line reflects the correct data for a

member who has two or more service periods or who is simultaneously a dependant and a member in their own right.

98. The Individual results tab collects the liability figure and Asset Share for each individual Beneficiary included in the valuation. It also collects data necessary to calculate a notional pension for each Beneficiary. In many circumstances the information you need to provide is based on the member’s actual status, which may be different to the position used for valuing liabilities. This is because for the purpose of valuing the liabilities options taken during windup (such as early or late retirement) are ignored.

99. Please ensure that when information is pasted into the spreadsheet that the paste values option in Excel is used so that validation operates correctly.

100. A single row should be completed for each individual in the valuation unless they have two or more separate entitlements e.g. arising from distinct non-consecutive periods of service or from their own service period and from benefits as a survivor. For Dubery members, one row should be completed combining both pensioner and non-pensioner liabilities.

101. Note, as explained in the detailed information in the next section, that lump

sums, including lump sums paid on death, should be included in the Interim payments columns. However lump sums paid on death should not be included in the Lump sum paid column.

102. Please note that where a member has died before the Calculation Date and

before their FAS Eligibility Date, there is no need to complete either the “FAS-shaped benefits” data items (“Proportion of benefits in respect of pre 97/post 97” to “Proportion of benefits in respect of pre 97/post 97”) or the


“Scheme-shaped benefits” data items (“Pension entitlement at start of wind up/date pension commenced if later” to “Date payment ceases under scheme rules”). This is because FAS does not have the power to make payments to these individuals, therefore no notional pension is calculated for them. If the results of the valuation indicate such members are due further money from the scheme, the trustees may decide to make these payments prior to transfer to FAS.

Individual results tab: in detail Data item When to complete How to complete NINo Always Format AA999999A

Member surname Always Text, no spaces Date of Birth Always Format dd/mm/yyyy


Category Always

Input the category data number corresponding to the Category data tab the member was included in

If the member has liabilities in more than one category, enter the category where their total liability is highest



Status Always

A member’s status should reflect their actual position as at the Calculation Date ie it should allow for actual options exercised such as early and late retirement. Deferred: Original member5 of scheme not receiving any payments at the Calculation Date Pensioner: Original member of scheme receiving part or all of their pension payments at the Calculation Date Spouse/Partner: Spouse/civil partner/other partner receiving survivor benefits at the Calculation Date Child: Child receiving survivor benefits at the Calculation Date Other dependant: A Beneficiary who is not eligible for FAS assistance, was not receiving payments from the scheme at wind up but was receiving payments from the scheme at the Calculation Date

Dubery member? Always

“Y” - If the member is a Dubery member or is a spouse/partner/child/other dependant of a Dubery member

“N” - Otherwise

Split service

member? Always

“Y” - If the member has more than one non-continuous period of service or is a spouse/partner/child/other dependant of a split service member

“N” - Otherwise

Deceased Always “Y” - If the member has died prior to the Calculation Date. “N” - Otherwise




Date of death

When a member died prior to the Calculation Date

Enter the date of death Please make sure after copying and pasting as values that these cells do not contain zero, or the validation checks may not work.

Date pension commenced

For all statuses except Deferred

For status Other dependant, this should be the date they became eligible for a payment from the scheme

For all other Beneficiary types, this is the date the Beneficiary started to receive a pension from the scheme. It should not be an earlier date to which pension payments were backdated.

If a member has passed NRA but not received any payments, this field should be left blank.

If a member receives assistance from FAS but no scheme pension, this field should be left blank.

Please make sure after copying and pasting as values that these cells do not contain zero, or the validation checks may not work.

Date original member died

For all statuses except Deferred and Pensioner

Enter the date of death of the original member Please make sure after copying and pasting as values that these cells do not contain zero, or the validation checks may not work.



Assets transferring to HMT?

Always

”Y” - If the Asset Share is to transfer to the government (even if the Asset Share is nil).

”Y” - For dead members ”N” - If the member’s Asset Share is

to be used to discharge liabilities, e.g. a top-up annuity is to be secured.

”N” - For partial annuitants with policies in their own name for whom top-up annuities are not being purchased but for whom residual assets are transferring to government.6

”N” - For dead other dependants, ”NK” - If an annuity policy exists in the trustees’ name for this member and it is not yet known whether the policy will be assigned to the member or transferred to FAS.

Beneficiary receiving present payments when regulations came into force

Always

“Y” - For deferred or pensioner members (whether dead or alive), if the member was receiving a payment from the scheme or had confirmed in writing that benefits should be put into payment prior to 2 April 2010

”Y” - For dependants, if the original member died prior to 2 April 2010

“N” - If a Beneficiary has received a lump sum only, but no regular pension payments

”N” - For all other beneficiaries

Adjusted liability in priority class 1, 2,…

Always

This is the Adjusted Liability (as defined in the Asset Share guidance) for that individual in that priority class. The numbers refer to those allocated to each priority class on the Priority order tab.

Total adjusted liability

Never This is an automatic calculation summing liabilities in each priority class

6 This is because, although assets in respect of these Beneficiaries will transfer to government, no notional pension will be calculated for these Beneficiaries. Top-up payments will be paid if necessary.



Adjusted asset share

Never

This is an automatic calculation combining the liabilities in each priority class with the relevant priority class coverage

Scheme interim payment value-pre FAS Eligibility Date

When the member has received payments from the scheme after start of wind up and before FAS Eligibility Date. If assets are not transferring to HMT, this information is not required.

These are the amounts actually paid from the scheme to the individual between the later of the date of scheme wind up and date pension commenced to the day before FAS Eligibility Date. It should include both periodic payments and any lump sum payments made to extinguish liabilities, excluding State Scheme Premiums It should include any lump sums paid on death It should include any payments made from annuities as well as those made via scheme payroll It should be net of any amounts reclaimed by the scheme, for example where overpayments have been made It should exclude any payments made post wind up in respect of periods pre wind up



Scheme interim payment value-post FAS Eligibility Date

When the member has received payments from the scheme on and after FAS Eligibility Date. If assets are not transferring to HMT, this information is not required.

These are the amounts actually paid to the individual from the scheme from the FAS Eligibility Date to the Calculation Date. It should include both periodic payments and any lump sum payments made to extinguish liabilities, excluding State Scheme Premiums It should include any lump sums paid on death It should include any payments made from annuities as well as those made via scheme payroll It should be net of any amounts reclaimed by the scheme, for example where overpayments have been made It should exclude any payments made post wind up in respect of periods pre wind up

Scheme interim payment value-total

Never This is an automatic calculation summing the pre- and post-FAS Eligibility Date Interim payments

Asset share Never

This is an automatic calculation combining the adjusted asset share with payments made. Section 3 of the Asset Share guidance provides for certain fields to be set to zero for dead members where the Asset Share is negative. However this should not be done until the FAS Scheme Manager is satisfied with the calculations. Please liaise with your FAS Actuarial Contact before zeroing out dead members.



Lump Sum paid If assets are transferring to HMT

This is the sum of any lump sums actually paid from the scheme between start of wind up and Calculation Date. This should include both commuted lumps sums and those accrued separately under the scheme rules paid to the individual It should include any payments made to extinguish liabilities under the scheme excluding any lump sums paid on death It should exclude State Scheme Premiums This includes any payments made from annuities as well as those made via scheme payroll If no lump sum has been paid, enter “0”

% of lump sum

paid pre FAS

Eligibility Date

If Lump Sum paid

completed

If the member has been paid one lump sum, this should be 100% if the lump sum was paid pre FAS Eligibility Date and 0% if it was paid post FAS Eligibility Date If the member has been paid more than one lump sum, payments could have been made pre or post FAS Eligibility Date therefore enter the proportion of the lump sums that was paid pre FAS Eligibility Date Enter as a percentage

Proportion of benefits in respect of pre 97/post 97

When the “Beneficiary receiving present payments when regulations came into force” flag is “N” and assets are transferring to HMT (but see paragraph 102)

This is the proportion of pension relating to pre- or post-1997 service It is assessed as the pre/post 97 proportion of the member’s total pension amount (i.e. not the proportion of the liability) at the wind up date It does not include Barber uplifts When an SSP has been paid, the pre 97 element should still include GMP benefits Enter as a percentage



Pension entitlement at start of wind up/date pension commenced if later

When the “Beneficiary receiving present payments when regulations came into force” flag is “Y”. If assets are not transferring to HMT, this information is not required. (but see paragraph 102)

This is the amount the member was entitled to under scheme rules after any commutation for cash not the amount actually paid. Any factors used should be the scheme’s actual factors in force at the relevant date. The commuted cash allowed for should be the actual amount commuted (which may be lower than their maximum entitlement). The amount should allow for GMP equalisation by being based on the sex that maximises the member’s pension entitlement. This should be consistent with the pension figures in the S1 data This may differ from the pension used to calculate liabilities, it is acceptable for the two pension amounts to be inconsistent. If the member began receiving pension payments before wind up, it is the amount due at the wind up date If they began receiving payments after wind up, it is the amount due at the date payments began This should exclude pension elements in respect of death benefit guarantees (these are provided separately where needed) It should include bridging pension due at wind up/date pension commenced If a dependant is being paid a death guarantee without overlap ie they are not being paid their “own” pension, enter the amount at the Calculation Date that they would be paid were the guarantee to cease on the Calculation Date If a State Scheme Premium has been paid, this should be the amount excluding GMP If a partial transfer has been paid, this should be based on the benefits before the transfer was paid



Spouse/partner’s proportion-death in retirement

When the “Beneficiary receiving present payments when regulations came into force” flag is “Y” (but see paragraph 102). If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

This is the proportion of the member’s benefit as provided in Column AK that a spouse/civil partner/other partner would receive if the member dies after NRA It is assessed at the later of wind up and date pension commenced for original member If the member is in receipt of payments and has commuted a proportion of their original pension, but their spouse’s pension would be based on the pre-commutation amount, the proportion should reflect this. For example, scheme rules may grant 50% of pre-commutation pension. 50% of pre-commutation pension may equate to 63% of the post-commutation pension actually in payment, so in this case 63% should be entered It should be entered as a percentage not an amount

Bridging pension at start of wind up / date pension commenced if later

When the “Beneficiary receiving present payments when regulations came into force” flag is “Y” and a bridging pension has been paid during the wind up period or is currently being paid at the Calculation Date (but see paragraph 102). Please do not complete this field if the scheme rules include a bridging pension but the trustees have smoothed this out for simplicity during wind up If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

This is the amount of bridging pension a member is/was receiving for a fixed period only If the member began receiving pension payments before wind up, it is the amount due at the wind up date If they began receiving payments after wind up, it is the amount due at the date payments began



Date bridging pension ceases

When the “Beneficiary receiving present payments when regulations came into force” flag is “Y” and a bridging pension has been paid during the wind up period or is currently being paid at the Calculation Date (but see para 102). Please do not complete this field if the scheme rules include a bridging pension but the trustees have smoothed this out for simplicity during wind up. If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

Format dd/mm/yyyy

If the bridging pension ceases on the

member’s eligibility date, the date

before this must instead be entered.

Guarantee paid as pension or lump sum.

For pensioner members when the “Beneficiary

receiving present payments when regulations came into force” flag is “Y”, and,

an unexpired guarantee exists at the Calculation Date (but see paragraph 102)

If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

This refers to guarantees in relation to deaths in retirement Please indicate whether guarantees on death are paid to survivor(s) as a pension or a lump sum If no guarantee is paid, leave blank



If guarantee is paid as a lump sum, does it include future increases?

For pensioner members when the “Beneficiary receiving present payments when regulations came into force” flag is “Y” and an unexpired guarantee payable as a lump sum exists at the Calculation Date (but see paragraph 102). If assets are not transferring to HMT (or this is not known – “NK”), this information is not required

If the scheme rules state that future increases are included in the guarantee lump sum enter “Y” otherwise enter “N”.

Is guarantee paid with overlap?

For pensioner members when the “Beneficiary receiving present payments when regulations came into force” flag is “Y”, an unexpired guarantee exists at the Calculation Date (but see paragraph 102) and the guarantee is paid as pension not lump sum. If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

If death guarantee payments are paid in addition to ongoing pensions paid to survivors/surviving dependants enter “Y” For example, this would apply where a spouse received a lump sum of the balance of member payments outstanding from date of death to five years after retirement plus a pension of 50% of member’s benefits from date of death If the survivor’s ongoing pension does not begin until the end of the guarantee period enter “N”



Guarantee

outstanding at

CALD/DOSW/DOD

For pensioner members when the “Beneficiary receiving present payments when regulations came into force” flag is “Y” and an unexpired guarantee exists or is in payment at the Calculation Date (but see paragraph 102). If assets are not transferring to HMT (or this is not known – “NK”), this information is not required. For dependants, where there was a guarantee outstanding at the later of date of death /date of scheme wind up

For original members this is the length of any death after retirement guarantee period that would have been payable if the member had died on the Calculation Date (CALD). For dependants this is the guarantee period that was outstanding at the later of date of scheme wind up and date of death for the original member Enter as a single decimalised figure e.g. 4 years and 2 months would be 4.17

Guarantee amount

For dependants with a with a non-zero entry in the previous column (column AR) (blank for all original members)

If the Beneficiary is receiving a pension as a result of a death benefit guarantee at the Calculation Date, enter the pension in relation to the guarantee only as at the later of the wind up date and the date of the original member’s death If the guarantee has expired, leave blank This figure should only include pension in relation to the guarantee, ie it is in addition to the pension in column AK



Date payment ceases under scheme rules

When the “Beneficiary receiving present payments when regulations came into force” flag is “Y”, assets are transferring to HMT and benefits are expected to cease at a date other than date of death (but see paragraph 102). If assets are not transferring to HMT (or this is not known – “NK”), this information is not required.

Scheme rules may put an end date on payments to certain beneficiaries. For example, payments to children may end at a certain age If such an expiry date exists, please enter that date. Otherwise leave blank The date should be consistent with the assumption used when calculating liabilities Ignore cessation due to remarriage i.e. leave blank Ignore cessation due to recovery from ill health i.e. leave blank


Individual results – annuities tab: overview 103. The Individual results - annuities tab collects information on individual

annuity policies. It should be completed for every individual included in the valuation where an annuity exists for that member, whether the policy is in the name of the member or the trustees.

104. Where there is more than one annuity policy for an individual, total pension

amounts and asset amounts should be combined in a single row. 105. Decisions will be required for members with annuities, namely:

(a) whether to assign the policy to the individual (if the annuity is in the trustee

name) and (b) whether to buy a top-up annuity

This tab brings together the relevant information to make these decisions and to record the outcomes. Appendix 2 – provides more information on the considerations for making these decisions.


Individual results – annuities tab: in detail

Data item When to complete

How to complete

NINo Always Format AA999999A

Member surname Always Text, no spaces Date of Birth Always Format dd/mm/yyyy


Status Always

Deferred: Original member7 of scheme not receiving any payments at the Calculation Date

Pensioner: Original member of scheme receiving part or all of their pension payments at Calculation Date

Spouse/Partner: Spouse/civil partner/other partner receiving survivor benefits at the Calculation Date

Child: Child receiving survivor benefits at the Calculation Date

Other dependant: A Beneficiary who is not eligible for FAS assistance, was not receiving payments from the scheme at wind up but was receiving payments from the scheme at the Calculation Date

Insurer(s) Always Name of the insurer(s) providing the annuity(s)

Annuity in Member / trustee name?

Always Choose appropriate option from drop down menu: Member; trustee; or Both

Pension paid by annuity at Calculation Date

Always Annual amount of pension from all annuity policies

Policy Value at Calculation Date Always

This is the value of the individual annuity policy based on the benefits due from the annuity for the individual.

This should be consistent with the

amounts shown on the Insured pensioner asset and Insured non-pensioner asset tabs.



Data item When to complete

How to complete

Asset Share from Individual results Tab

Never This is an automatic calculation.


Annuity in Member’s Name Asset Share ≥ Policy Value?

Never This is an automatic calculation. Completes with Yes or No, if applicable

Is member being bought a top-up annuity?

If annuity in member name

FAS Valuation Actuary to determine, following discussion with FAS Actuarial Contact.

Complete with Yes, No from drop down menu as applicable.

Adjustment to Assets Tab (negative adjustment)*?

Never

This is an automatic calculation. Gives negative adjustment to assets tab

to maintain asset coverage where Asset Share > Policy Value. This

adjustment should be entered on the Assets tab.

Annuity in Trustee Name Asset Share ≥ Policy Value?

Never This is an automatic calculation. Completes with Yes or No, if applicable.

Assign annuity to member?

If annuity in trustees’ name

FAS Valuation Actuary to determine, following discussions with FAS Actuarial Contact.

Complete with Yes, No from drop down menu, as applicable.

Is member being bought a top-up annuity?

Never

FAS Valuation Actuary to determine, following discussions with FAS Actuarial Contact

Complete with Yes, No from drop down menu, as applicable.

Adjustment to Assets Tab (negative adjustment)*?

If annuity in trustees’ name and Asset Share > Policy Value

This is an automatic calculation. Gives negative adjustment to assets tab

to maintain asset coverage where Asset Share > Policy Value and

member is not being bought a top-up annuity.

*Please note that this automatic calculation should be used with caution as the position on asset coverage will be affected by making adjustments to the valuation for: - members with annuities in their own name where these are more valuable than the member’s asset share; and - removing dead members with negative asset shares from the final valuation. The effect of both these changes is to reduce the asset shares for other members which may have follow on implications. For example, additional members may emerge where the annuity in the member’s name is more valuable than their asset share etc. This step may therefore have to be repeated several times. See Appendix 2 for further details.


Validation tab: overview

106. The template performs a number of automated checks on data and results which are entered. This aims to identify any errors or issues before the template is submitted. The FAS Actuarial Contact will perform additional checks once the template is submitted.

107. The template performs a number of automated checks on data and

results which are entered. This aims to identify any errors or issues before the template is submitted. The FAS Scheme Manager will perform additional checks once the template is submitted.

108. The Validation tab identifies whether or not all tests have been

satisfied based on the information provided for each tab. The Results column will indicate “Pass” if all checks have been satisfied. If it has not been satisfied, the Results column will indicate “Warning” and/or “Error”. The individual tabs will provide more details on why a “Warning” or “Error” message has been generated – these details are provided at the bottom of each tab (with the exception of the Individual results tab, where they are on the right).

109. If a “Warning” result is given, please first check that the information has

been input correctly. If you are confident that the information input is correct and believe there is a valid reason why the checks are not being passed, please provide additional information in the relevant free text box. For example, the scheme’s membership profile may mean that an approximate check of the liabilities will not tie up with the FAS Valuation Actuary’s detailed calculations. Please use the Category 1-3 tabs to enter additional information (e.g. splitting the sub-categories further or showing individual member examples on additional lines at the bottom of the tab) to demonstrate that the approach taken is appropriate.

110. If you have any queries about “Warning” results, please discuss with

your FAS Actuarial Contact prior to submitting the validation template. 111. If an “Error” result is given, this normally indicates a problem which

must be resolved before the valuation can be submitted. This will occur when it is highly unlikely that the automatic check will not be passed. For example, an “Error” result will be given if the sum of pre- and post-1997 proportions of benefits is not equal to 100 per cent.

112. If an “Error” result is given, please first check that the information has

been input correctly. If you are confident that the information input is correct, and if you are unable to resolve the matter by further splitting the sub-categories of liabilities or by demonstrating that the approach taken is appropriate for a sample of individual members please contact your FAS


Actuarial Contact to discuss how to resolve the problem. Where appropriate, please provide an explanation in the relevant free text box.

113. The validation checks can be turned off while you are completing the

spreadsheet. To do this, select “No” to the request “Would you like to validate the template?” on the Validation tab.


Appendix 1: Glossary Accounts guidance: Information on the preparation of relevant accounts and guidance for actuaries to value particular assets to support FAS Valuations published by DWP. Adjusted Liability: The liabilities in respect of payments due after the Calculation Date plus the total amount of payments that would have been made to the Beneficiary between the Commencement Date and the Calculation Date had the scheme not started to wind up (Asset Share guidance section 3, paragraph 6). Asset Share: The ‘Adjusted Asset Share’ minus the total amount of defined benefit scheme payments made to the Beneficiary between the Commencement Date and the Calculation Date. Some negative Asset Shares so calculated are adjusted to zero, but some members may have a negative Asset Share. Asset Share guidance: Guidance on Method & Assumptions to use when undertaking a valuation under Reg 22 of the Financial Assistance Scheme Regulations 2005. Published by DWP on their website: http://www.dwp.gov.uk/other-specialists/financial-assistance-scheme/fas-guidance/ Beneficiary: A person entitled to benefits from the pension scheme (Asset Share guidance section 2, paragraph 8) who has an Asset Share calculated for them Buy out basis: Also known as the FAS synthetic buyout basis. This is the basis to use where a buyout basis is required by the statutory priority order. See Asset Share guidance, section 4. Calculation Date: As defined in Regulation 2(1) of the FAS Regulations, this is the ‘as at’ date for the Reg 22 Valuation. Commencement Date: The date of the start of the scheme’s winding-up process, as determined under regulation 3 of the FAS Regulations. Crystallisation Date: Referred to in Regulation 4 of the Occupational Pension Schemes (Winding Up) Regulations 1996 (SI 3126/1996) (as amended) (the “Winding Up Regulations”). It is usually equal to the Commencement Date. If the two dates differ, the FAS Valuation Actuary should contact their FAS Actuarial Contact. Dubery members: Members for whom some of their entitlement has arisen prior to the Crystallisation Date and some has not. (FAS) Expected Pension: This is used to derive standard FAS assistance which is the accrued scheme pension at the start of wind up, revalued using FAS rules to the FAS Eligibility Date and subject to a cap and a multiplier of 90%.


FAS Actuarial Contact: Member of the FAS actuarial team with responsibility for seeing the pension scheme through the Reg 22 Valuation process. (If you do not know who your scheme’s FAS Actuarial Contact is, contact [email protected].) FAS Eligibility Date: Eligibility date for original members is the later of 14 May 2004, FAS NRA8, and date of scheme wind up. Eligibility date for dependants where the original member died during wind up is the later of 14 May 2004 and the day after the original member died. Eligibility date for dependants where the original member died before wind up is the later of 14 May 2004 and date of scheme wind up

FAS Regulations: The Financial Assistance Scheme Regulations 2005 as amended by the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2010 FAS Scheme Manager: The Board. FAS synthetic buyout basis: See Buy out basis FAS Valuation: A Reg 22 Valuation (defined below). FAS Valuation Actuary: Person appointed by the trustees of a pension scheme and approved by FAS to carry out the Reg 22 Valuation of the pension scheme. GN27: An actuarial guidance note available from the Actuarial Profession’s website. http://www.actuaries.org.uk/research-and-resources/documents/gn27-retirement-

benefit-schemes-minimum-funding-requirement-versio-8 Interim payments: The total amount of defined benefit scheme payments made to the Beneficiary between the Commencement Date and the Calculation Date. MFR basis: the assumptions set out in the MFR Regulations and GN27

MFR Regulations: the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulation 1996 (SI 1996/1536) Reg 22 Valuation: Regulation 22 of The Financial Assistance Scheme Regulations 2005 (SI 2005/1986), as amended, requires the Financial Assistance Scheme (FAS) scheme manager to instruct the trustees or managers of relevant schemes to obtain a valuation of the scheme’s assets, scheme’s liabilities and the asset shares for relevant beneficiaries. Repliweb: The secure method for return of data to FAS. This is a secure online system for sending emails. You will be given login details. S1 data: Individual member dataset provided in a specified FAS format by the administrator.

8 FAS NRA is the age at which a member will normally retire that was specified in the scheme rules applicable at the date they ceased to accrue benefits under the scheme. The scheme administrator should provide confirmation of FAS NRA as defined on the S1.


Solvent: See regulation 4A of the Winding Up Regulations. Split Priority members: See Dubery members

Statement of Investment Principles (SIP): A written statement of the principles governing decisions about investments for an occupational pension scheme, which trustees are required to prepare and maintain. When preparing the SIP, trustees must have regard to advice from a suitably qualified person, and consult with the employer.

Underpin Benefits guidance: This is an appendix to the Asset Share guidance. http://www.dwp.gov.uk/other-specialists/financial-assistance-scheme/fas-guidance/ Validation template: An Excel spreadsheet which you may download from the PPF website. This captures the results of the Reg 22 Valuation, plus additional data required by FAS. Valuation Commissioning Letter: Letter from the FAS Actuarial Contact to the scheme trustees to formally request the Reg 22 Valuation. Winding Up Regulations: the Occupational Pension Schemes (Winding Up) Regulations 1996 (SI 3126/1996)


Appendix 2: Annuities Overview Annuity policies to be included in a FAS Valuation will have been agreed before the valuation was commissioned. Once the valuation is nearly ready to be finalised decisions will need to be taken on:

(a) whether to assign the policy to the individual (if the annuity is in the trustees’ name); and

(b) whether to buy a top-up annuity The Individual results - annuities tab contains information to help the valuation actuary in making these decisions. (Details of relevant columns below all refer to this tab.) The main aims from FAS’s point of view are:

1. Assign annuities to the member where possible (subject to aim 2. below); and 2. Make sure that the member gets the full value of their Asset Share.

For example, if the Asset Share is greater than the policy value, but there is no practical way of getting the money to that member then we would not assign the remaining Asset Share to the member. For example if the excess Asset Share was £100 then it would in all likelihood not be possible to secure a top up annuity. Your FAS Actuarial Contact will instruct the FAS Valuation Actuary when it is appropriate to make these decisions. Full details of the annuities and liabilities for all affected members should be included in the valuation until decisions on members with annuities have been agreed with the FAS Actuarial Contact. The FAS Valuation Actuary will then be instructed to make the appropriate final changes to the validation template. Annuities in the members’ name These should be included in the initial versions of the valuation, but they will never be included in the final version of the valuation. The purpose of including them in the valuation is to assess whether the member is due a top-up annuity (see Section 2, paragraph 17 of the Asset Share guidance). When the FAS Actuarial Contact is comfortable with the liability valuation and the asset shares have been input into the template, they will instruct the FAS Valuation Actuary to consider if any members should be bought a top-up annuity. In order to make the decision the FAS Valuation Actuary should consult the “Guidance on how to calculate 90% of expected pension” available on the PPF website. http://www.pensionprotectionfund.org.uk/FAS/info_pensions_professionals/Pages/TechnicalBulletins.aspx


Asset Share ≥ Policy Value? (Column K) The comparison of values takes place at the calculation date. Arrears also need to be considered (see FAQ 6 below). If the member’s Asset Share is greater than the policy value then a top-up may be due. (Column K = Yes) The appointed actuary should consider whether, after allowing for any arrears payments (see FAQ 6 below), the residual Asset Share is sufficient to buy a top-up so that the member would get at least 90% of Expected Pension. If it could then a top-up annuity should be purchased for the member. (Column L should be completed as “Yes”.) If it wouldn’t be possible to purchase a top-up to bring the members’ pension over 90% of Expected Pension then no top-up should be purchased and the residual assets should transfer to the FAS. The member receives standard FAS assistance. This is because there is no point in topping up if the member would still get 90% of Expected Pension overall. It would just change the split of the source of the income between that the member would receive from the annuity and that from FAS. (Column L should be completed as “No”.) In both cases Column M will then automatically be completed with the adjustment that needs to be made to the Assets tab to maintain the same level of asset coverage for other members. See FAQ 4 below. Asset Share < Policy Value? (Column K) The comparison of values takes place at the calculation date. If the Asset Share is less than the policy value (Column K = “No”) then a decision is still needed on if the member should be included on the S1. The FAS Valuation Actuary should consider if the existing annuity provides more than 90% of Expected Pension? (See FAQ 5 below.) These members will need to be excluded from the valuation in line with FAQ 4 below. However, no additional adjustment should be made to the Assets tab to reflect the fact that they are exiting the scheme with an annuity that is worth more than their Asset Share (ie in addition to removing their annuity and interim payments from the Assets tab as per FAQ 4). The asset coverage for other members will therefore be reduced. An example setting out the order in which actions should be completed where the scheme has members who fall into this category is provided at the bottom of appendix 2.


FAQs on annuities in the members’ name Q1: What shape of pension should the trustees buy with the top up? E.g. should the pension be level or increasing? A1: The trustees may buy an annuity in whatever shape they wish. Q2: What needs to happen before the scheme can transfer to FAS? A2: Any top-ups needed should be purchased and assigned to the member. Note that this needs to happen before the scheme transfers to FAS but not necessarily before the valuation is approved (which is around 3 weeks before transfer). Q3: How should we represent the members on the initial validation template? A3: Members should be included in all the relevant tabs for the initial valuations. They should have “N” for “assets transferring to HMT” on the Individual results tab and no scheme or FAS shaped benefits need to be filled in for them. The Insured pensioner assets and Insured non-pensioner assets tabs should be filled in as applicable. The Individual results – annuities tab should also be filled in. Q4: How should we represent the members on the final validation template? A4: Members with annuities in their own name should have: Individual results tab - entries should be set to zero. To do this set their liabilities and Interim payments to zero. (This should follow through into the Asset Share columns.) Assets tab – value of annuities and scheme interim payments should be excluded. Members with a positive Asset Share should also have a negative adjustment applied (Column M) based on the Individual results - annuities tab and details should be completed to explain this adjustment in the “Other information” boxes. Priority order tab – liabilities for members should be removed. (There is no need to change the Category or the insured annuity tabs.) Q5: How should we represent members on the S1? A5: Members who have either a top-up annuity purchased or have an annuity that is already sufficient to provide more than 90% Expected Pension should not be included on the S1. Members who will receive standard FAS assistance should be included on the S1. Q6: How should I deal with arrears payments? A6:(i) If a member is to be included on the S1, once the scheme transfers to FAS the member will be assessed by FAS to see if they are due arrears to top them up to 90% of Expected Pension for the period from their FAS Eligibility Date to a current date. There is therefore no need to consider arrears in this scenario. (ii) If a member is not on the S1 because their annuity provides more than 90% of Expected Pension, FAS will not pay any arrears. We would only expect a top-up to be purchased where the resulting annuity provides more than 90% of Expected Pension. This means that trustees need to make an allowance for any arrears due when calculating and purchasing a top-up annuity. This can be done by making a lump sum arrears payment or by increasing the annuity level going forwards – the decision is for the trustees. To summarise, the trustees may find it simplest to first deduct any arrears payment from the residual Asset Share, then see whether the


remaining residual Asset Share is enough to top the annuity up to over 90% of Expected Pension going forwards. Annuities in the trustees’ name Similarly to annuities in the members’ name, the additional calculations to decide if members are to receive a top-up annuity and if the annuity should be assigned to the member should be performed when the FAS Actuarial Contact instructs the FAS Valuation Actuary to carry out the comparison. The comparison of values takes place at the calculation date. Arrears also need to be considered (see FAQ 6). Asset Share < Policy Value? (Column N) If the member’s Asset Share is less than the policy value (Column N = “No”) then the annuity should transfer to FAS and should not be assigned to the member. (Column O should automatically fill to show this.) Individual results tab – set “assets transferring to HMT” to “Yes”. FAS or scheme shaped benefits should be completed as appropriate if this hasn’t already been done. Assets tab - the asset value for the annuities should be included. Priority order tab – include members’ liabilities. These members should be included on the S1, with the annuities worksheet filled in for them as well as the usual details. Asset Share ≥ Policy Value? (Column N) If the Asset Share is greater than the Policy Value (Column N = “Yes”) then we need to consider whether a top-up can be purchased that would bring the members’ benefits to over 90% of Expected Pension. The considerations for this are precisely as above. Again, arrears payments also need to be considered. The policy should be assigned to the member, unless there is a risk that assigning the annuity to the member and not buying a top-up could mean that the member receives less than the full value of their Asset Share (in which case the policy should transfer to FAS. Complete Column P = “No”. ). If the Asset Share is sufficient to top up the member to 90% of Expected Pension then the residual Asset Share should be used to purchase a top-up annuity. As before, these will need to be purchased and assigned before the scheme transfers to FAS. The FAS Valuation Actuary should complete Column P to indicate if a top-up annuity is being purchased. Column O should then automatically complete to show the final decision on assigning the annuity. Members where the existing annuity is being assigned to them should be excluded from the final valuation. The steps to complete the final valuation are as follows: Individual results tab - entries should be set to zero. To do this set their liabilities and Interim payments to zero. (This should follow through into the Asset Share columns.) Also change “assets transferring to HMT” to “N”.


Assets tab – value of annuities and scheme Interim payments should be excluded. Members with a positive asset share should also have a negative adjustment applied to the “Other Adjustment Cell” and details should be completed to explain this adjustment. (Column Q.) Priority order tab – liabilities for members should be removed. (There is no need to change the Category or Insured annuity tabs.) FAQs on annuities in the trustees’ name Q1: How should we represent members on the S1? A1: Where the annuity is transferring to FAS, members should be included on the S1, with the annuities worksheet filled in for them as well as the usual details. Where the existing annuity is being transferred to the member and the member is also having a top-up annuity purchased (Column P = Yes) the member should be removed from the S1 and no details should be provided on the annuities worksheet. Where the existing annuity is being transferred to the member and the Asset Share is not sufficient to top up the member to 90% of Expected Pension ie no top-up annuity is being purchased (Column P = “No”) the member should remain on the S1 and details should be provided on the annuities worksheet. Members with annuities in both the members’ and trustees’ names. A single line should be completed on the Individual results– annuities tab showing the combined values of the policy values and Asset Shares. As these cases arise very infrequently please contact your FAS Actuarial Contact to discuss the approach that should be taken.


Tricky Example Scheme has:

1. A mixture of members with annuities in their own name: (i) some of which are more valuable than the member’s asset shares; and

(ii) some of which are less valuable than the member’s asset shares.

AND 2. Some dead members with negative asset shares.

The removal of members with annuities in their own name (where the annuity has a higher value than the member’s asset share) and dead members with negative asset shares from the valuation reduces the level of coverage for other members. In what order should this be done?

1. Firstly the annuitants with Column K = “No” should be dealt with. The instructions for removing these members only from the valuation should be followed. The asset coverage for all other members will fall.

2. There may be additional annuitants who now have Column K = “No”. These annuitants should be similarly removed from the valuation since they now have an annuity in their own name that is more valuable than their asset share. This step may need to be repeated several times until there are no further annuitants with Column K = “No”.

3. Dead members with negative asset shares should then be dealt with.

Set scheme interim payments and liabilities in the Individual Results Tab to zero. Changes should then be followed through to the Priority Order and Assets tabs and the asset coverage for the scheme will drop.

4. Steps 2 and 3 should be repeated in turn until there are no members remaining with Column K = “No” or dead members with negative asset shares.

5. The valuation can then be finalised for the remaining members by making both

the negative adjustment (Columns M and Q) to the final Assets tab and the other changes detailed above for such members. The coverage on the Priority Order tab after these final changes should be the same as at the end of step 4.


Annuities : include in valuation?

Annuity in name of pensioner?

Yes

Is value of annuity exactly equal to asset share?

Equal or less than benefit entitlement

Yes

Is the annuity for the members right benefit? (e.g. amount/increases/spouses benefit)

Member included in initial valuation

No/unsure

Member included in Valuation. Trustees

should consider restricting to scheme

entitlement.

Exceeds benefitentitlement

(Mem Rec 2e)

Go to next page

Yes

Instruct trustees to assign to member prior to valuation being completed

Can the annuity be assigned on consistent

terms?

No

No(Mem Rec 2e)

Member included in Valuation.

NOTEAnnuities included in Valuation:(a) Trustees need to request surrender value when annuity is transferring to government; if surrender value greater than value of annuity, policy should be surrendered and cash transfers to government(b) GMPs will need to be equalised(c) After initial valuation trustees assess whether purchasing additional annuities is in members’ interests. A key question will be whether purchasing annuities will increase members’ benefits above 90% entitlement. Purchasing annuities benefits members, trustees will purchase additional annuity. Otherwise additional asset share transfers to government and member treated as a FAS1 member.. (d) Decision after initial valuation whether to assign annuity to member or transfer to FAS(e) Where the scheme actuary is confident the funding is sufficient to secure benefits above 90% entitlement but unsure of exact amount the member is included in the initial valuation and excluded from the S1 form. The member reconciliation table must reflect this.

Is actuary able to confirmbefore initial valuation asset share

sufficient to buy annuity above 90% entitlement?

No(Mem Rec 2b)

Additional annuities purchased and

assigned to member. Member not included

in valuation

Yes

Any AVC benefits need to be clearly identified.

Can final asset sharebe determined before

valuation?See note (e)

Yes

Include member in initial valuation. Trustees purchase top before valuation finalised.

No(Mem Rec 2a)


Appendix 3: Legislation and Compliance 63. Regulation 22 of The Financial Assistance Scheme Regulations 2005 (SI

2005/1986), as amended, requires that the Financial Assistance Scheme (FAS) scheme manager instruct the trustees or managers of relevant schemes to obtain a valuation of the scheme’s assets, scheme’s liabilities and the Asset Shares for relevant beneficiaries.

64. The information required is to be provided in the form of a Microsoft Excel spreadsheet referred to as the “validation template”. No formal report will be required to accompany this template. However, the template provides the opportunity for the FAS Valuation Actuary to give additional written information on their treatment of assets and liabilities where necessary.

65. The information provided in the template and at the request of the FAS Scheme

Manager will be comprehensive, and further information will not be taken into account. We therefore consider that it is very unlikely that actuaries will have to submit any further information in addition to the template in order to comply with Technical Actuarial Standard – Reporting (TAS R) issued by the Board for Actuarial Standards (BAS). However, this is ultimately a matter for the judgement of the individual actuary.

Download - The Financial Assistance Scheme VERSION GT5 pensioner assets tab: overview ... How to complete the validation template: overview ... Actuary FAS Valuation Actuary Validation validation

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