The Pensions Regulator

Code of practice 03
Funding defined benefits

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Providing information to members: the summary funding statement

Issuing the statement

142. A summary funding statement must be issued to all scheme members and beneficiaries within a reasonable period following the date by when the trustees must receive each actuarial valuation or actuarial report.¹⁰¹ Prior to a scheme's first valuation under Part 3, summary funding statements must be issued annually with the first statement being provided no later than 21 September 2006.¹⁰²
143. The statement does not have to be sent to a deferred member or pension credit member whose present address is unknown and if correspondence sent to that member's last known address has been returned.¹⁰³

Reasonable period

144. Drafting of the summary funding statement should be treated as a standard component of the actuarial valuation or actuarial report process. An undue delay in issuing the statement to members should thereby be avoidable. A reasonable period for providing the statement will vary from scheme to scheme. However, the Pensions Regulator considers that the statement should normally be provided within three months from the date by when valuations or reports must be obtained.

Principles to be applied when drafting the statement

145. Trustees must include in the statement an explanation of any change in the scheme's funding position.¹⁰⁴ They should be able to produce this explanation using relevant and readily available information, such as the most recent actuarial valuation, the latest audited accounts and the last actuarial report. Until the trustees have received the first valuation under Part 3, they could use information such as the last MFR valuation and any subsequent certifications of the schedule of contributions, together with the annual report and accounts for the scheme. Trustees should consult with the actuary when preparing this explanation. It is not anticipated that preparing this explanation will entail significant extra work on the actuary's part.
146. The statement will be the members' principal source of information on funding matters. Therefore, trustees should make the document clear and comprehensible, avoiding any undefined jargon.

Contents of the statement

147. Trustees must include certain matters in the statement.¹⁰⁵ They should also consider including:
148. • an introductory paragraph explaining that the statement's purpose is to give members information about the funding of the scheme;
     • an explanation as to the operation of a defined benefit scheme, i.e. that there is one common fund, as members often think that their own pension is in an individual account;
     • a suggestion that if, as a result of its funding position, any members are considering leaving the scheme they should consider obtaining professional financial advice before taking this step;
     • a reminder to members of the need to inform the trustees of any change of address;
     • a summary of the scheme's investment policy;
     • a reference to the protection offered by the Pension Protection Fund; and
     • a list of the funding and related documents available on request.¹⁰⁶

Statement due before first Part 3 valuation

148. Where a statement is due before the first Part 3 actuarial valuation has been received, the trustees must include certain matters in it.¹⁰⁷ They should also consider including:
149. • the date when the trustees expect to provide the first statement based on the results of a Part 3 actuarial valuation; and
     • those matters which they should also consider including in the first statement due after the first valuation under Part 3.¹⁰⁸

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