PSI20.2.19 - Funding and Surpluses:
Self-Administered Schemes - Form of Actuarial Reports –
Valuation Results
-
(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
The component parts of the balance sheet are expressed as
present values. This is done by estimating the total benefits to be
paid and total contributions to be received, taking into account
the mortality rates and salary progression adopted and the
membership at the valuation date. These payments are then
discounted back to the valuation date at the rate of interest
assumed. The difference between the present value of the future
benefits and future contribution income is then compared with the
accumulated fund. The result should ideally be zero as this means
that the scheme is actuarially solvent (see
PSI20.2.22). If the result is
positive, the scheme is in surplus and if it is negative, the
scheme is in deficit.
| Example: | Present value of
future benefits | £100,000 |
| Less present value of
future contributions | £50,000 |
| Net liability | £50,000 |
| Less value of assets
at valuation date | £40,000 |
| Deficit | £10,000 |
Contact: | Date issued: | Next review:
