Minimum Funding Requirement Definition

GLOSSARY

Published by a ��Ӱ�� Pensions expert

What does Minimum Funding Requirement mean?

Before it was repealed by the statutory funding objective, Pensions Act 1995, s 56 specified that the funding level of a defined benefit scheme should not be less than its actuarial liability. A prescribed set of actuarial assumptions were used to calculate the MFR. Schemes could be fully funded on the MFR basis but hugely in deficit on other bases eg buy-out.

The MFR was replaced with effect from 30 December 2005 by the statutory funding objective; however, transitional provisions applied until schemes had their first actuarial valuation under the new regime.

View the related practice notes about Minimum Funding Requirement

The previous employer debt regimes [Archived]

THIS PRACTICE NOTE APPLIES TO OCCUPATIONAL DEFINED BENEFIT PENSION SCHEMES IN ENGLAND AND WALES THAT ARE SUBJECT TO THE EMPLOYER DEBT REQUIREMENTSARCHIVED: This archived Practice Note considers the employer debt/section 75 debt regimes that were in force prior to 6 April 2008, including under the Occupational Pension Schemes (Employer Debt) Regulations 2005, the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1996, the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1994 and the Occupational Pension Schemes (Deficiency on Winding Up etc) Regulations 1992. It is not maintained. For further information on the current employer debt regime, see Practice Note: When is a section 75 debt triggered?The Occupational Pension Schemes (Employer Debt) Regulations 2005, SI 2005/678 (the 2005 Employer Debt Regulations) prescribe how an ‘employer debt’ due under section 75 of the Pensions Act 1995 (PA 1995) (or section 75A for multi-employer schemes) is:•currently triggered•how it is calculated, and•the different methods of dealing with the debtThe 2005 Employer Debt Regulations were first introduced with effect on and from...

The scheme-specific funding regime

FORTHCOMING DEVELOPMENT: TPR is working on updating its guidance on assessing and monitoring the employer covenant. According to TPR’s updated guidance on climate change (published at the end of September 2022), this was expected to be published in late 2022, however this not occur.This updating work had previously been referred to in TPR’s Annual Funding Statement 2022, with TPR stating that the updated guidance would be published as part of its second consultation on the draft DB funding code. Despite the publication of the second consultation in December 2022, the updated employer covenant guidance continues to be awaited.However, in its first response to the first defined benefit funding code of practice consultation also published in December 2022 (alongside the second consultation on the on draft DB funding code), TPR did note that it would consult on the updated guidance on assessing and monitoring the employer covenant in 2023. However, this also did not occur. Among other things, the updated employer covenant guidance would include a section on how trustees and...

Discover our 15 Practice Notes on Minimum Funding Requirement

Scheme ordered to recalculate transferred-in pension as it had failed to comply with previous Pensions Ombudsman directions (Mr N, CAS-58599-D4R5)

Pensions analysis: The Pensions Ombudsman has upheld a complaint in Mr N, CAS-58599-D4R5 that a scheme had wrongly calculated a deferred pension as set out under a 2020 Pensions Ombudsman direction. The Pensions Ombudsman disagreed with the method that the trustee had used to determine the additional deferred pension and retirement options for the member as a result of a previous transfer in and directed that the scheme recalculate the pension and pay any resulting interest or tax imposed on the member. Martin Scott of gunnercooke LLP looks at the decision.

Aon says new pension funding rules may be step backward

Law360, London: The UK's retirement industry watchdog should drop plans to introduce a new 'yardstick' on pension scheme compliance, or else face the potential for turning back the clock on scheme funding, Aon plc said on 7 December 2021.

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