Lord Myners – 2016 Parliamentary Question to the Department for Work and Pensions

The below Parliamentary question was asked by Lord Myners on 2016-07-12.

To ask Her Majesty’s Government whether they have any plans to change the discount rate used to calculate the funding status of defined benefit pension schemes.

Lord Freud

The legislation governing the funding of defined benefit occupational pensions schemes is designed to be flexible, allowing the trustees or managers of these schemes to determine which method and assumptions are to be used in their schemes technical provisions. A number of factors come into play in scheme funding decisions and the Pensions Regulator provides useful guidance for trustees in its codes and supporting guidance and statements.

In determining the discount rate to be used, trustees must act prudently taking into account the yield on assets held by the scheme and / or the market redemption yields on Government bonds or other high-quality bonds.

There is no standard actuarial method and set of assumptions that must be used, however, should the Regulator have concerns about a funding plan it can intervene.