The Government is considering making interim changes to the MFR, as suggested in last week's Institu...
The Government is considering making interim changes to the MFR, as suggested in last week's Institute of Actuaries report.
The Institute was asked to review MFR by the DSS in March and has produced its review for consultation.
The consultation period closes on 31 January 2001 when Paul Myners will report to the pre-Budget Committee.
The Institute believes interim changes to the formula of how assets are calculated and matched to liabilities within a pension scheme are necessary to align the strength of the current MFR test with the original intentions.
It recommendations include:
l Reduction in mortality rate assumption to reflect an extra two years' longevity which will produce an increase in MFR liabilities for both pensioners and members who have not yet retired, of about 6.5% for most schemes.
l Change way liabilities for pensioners are assessed to take into account declining inflation and interest rate environment.
This could increase MFR liabilities for pensioners by up to 3.5%.
For schemes currently funded at the 100% level, the overall effect of these changes should increase the assets which would have to be held by a typical scheme by up to 5% in order to maintain funding at the 100% level.
Longer term, the Institute suggests a radical overhaul of the MFR if it is to be retained.
Moves to overweight equities and fixed income
The Big Interview: Focus on ethical investment
View from the front row
'No control or oversight'
359 new customers in 2018