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Pension Funding and Expensing in the Minimum Funding Requirement Environment

Published online by Cambridge University Press:  10 June 2011

P.M. Greenwood  and
T.W. Keogh
P.M. Greenwood
Affiliation:
William M Mercer Ltd, Westgate House, 52 Westgate, Chichester, West Sussex, PO19 3HF, U.K. Tel: +44 (0)1243 522538; Fax: +44 (0)1243 532142; E-mail: [email protected]
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Abstract

The statutory Minimum Funding Requirement (MFR) introduces fundamental change to the funding of pension schemes in the United Kingdom. While only a minority of schemes will actually be affected materially in terms of actual contributions or benefits, taken over a period of years, the influence of MFR will be much more widely felt. This is because the MFR is an absolute standard to be met, whereas long-term funding targets for ongoing schemes are, at least up to a point, optional and adjustable. The paper discusses the difference between MFR and long-term funding and suggests a variation on traditional actuarial methods to control explicitly the risk of MFR failure, based on a combination of traditional methods and the theories underlying asset/liability modelling. The paper also discusses the implications for pension expensing and communication of funding levels.

Keywords

RiskFundingPension SchemesMinimum Funding RequirementConflicts
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 3 , Issue 3 , 01 August 1997 , pp. 497 - 582
Copyright
Copyright © Institute and Faculty of Actuaries 1997

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