The Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025

40 Calculation of benefits

(1) The rules of an unconnected multiple employer scheme— (a) must contain the provisions set out in paragraphs (2) to (5), and (b) are overridden to the extent that they conflict with those provisions. (2) In relation to the determination of the value of the available assets of the scheme, the assets to be taken into account are the available assets of the scheme attributed to the scheme in the relevant accounts, excluding any resources invested in contravention of section 40(1) of the Pensions Act 1995 (restriction on employer-related investments). (3) In relation to the determination of the required amount— (a) that the trustees must apply the methods set out in the scheme rules; (b) that the mortality tables used and the demographic assumptions made, having regard to the main characteristics of the members as a group, must be based on a central estimate basis; (c) that the discount rate must be determined using a central estimate of the estimated future returns on assets held by the scheme or expected to be held in the future; (d) that the inflation assumptions used must be based on a central estimate basis. (4) In relation to the adjustment to the rate or amount of benefits provided under the scheme— (a) that the trustees must apply the methods set out in the scheme rules; (b) that any such adjustment must be based on the actuarial valuation calculated by reference to the most recent effective date; (c) that any such adjustment must be applied to all the members of the scheme without variation; (d) that any such adjustment must be applied on the benefit adjustment date; (e) that, subject to sub-paragraph (f) and except where there is a multi-annual reduction in effect, the amount of any adjustment required or made to the rate or amount of benefits provided under the scheme that is an increase must be determined on the assumptions that— (i) that increase will be made in each year of the remaining lives of— (aa) the beneficiaries of the scheme on the effective date; (bb) the expected survivors in relation to the members of the scheme on the effective date, and (ii) that increase will include the projected change in inflation; (f) that, except where there is a multi-annual reduction in effect, the amount of any adjustment required or made to the rate or amount of benefits provided under the scheme that is an increase must be determined on the assumption that, to the extent that the increase is greater than whichever is higher of— (i) 2% per annum above the percentage increase in the consumer prices index; (ii) a percentage per annum above the percentage increase in the consumer prices index, if any, set out in the scheme rules for the purposes of this sub-paragraph, that part of the increase will not be made in any year other than the year in which the adjustment first takes effect. (5) In relation to how the rates at which rights to benefits under the scheme accrue are to be determined, that the rates are to be determined with the effect that either— (a) the expected value of rights to benefits of each active member which are expected to accrue under the scheme during the relevant period, calculated on an actuarial basis, is equal to the value of the contributions expected to be made into the scheme by, on behalf of or in respect of the member in that period, or (b) in respect of each employer that uses the scheme, the aggregate expected value of the rights to benefits of the active members of the scheme employed by that employer which are expected to accrue under the scheme during the relevant period, calculated on an actuarial basis, is equal to the value of the aggregate contributions expected to be made into the scheme by, on behalf of or in respect of those active members in that period. (6) For the purposes of paragraph (5) the “relevant period” is such period as is agreed by the trustees of the scheme and the scheme actuary over which the rates at which the rights to benefits under the scheme accrue are expected to be applied. (7) Subject to paragraph (3), it is for the trustees of an unconnected multiple employer scheme to determine, having obtained advice from the scheme actuary, which assumptions are to be used— (a) for the purposes of determining the required amount on which the adjustment to the rate or amount of benefits provided under the scheme is based; (b) for the purposes of paragraph (5). (8) Paragraphs (9) to (17) apply where the scheme rules of an unconnected multiple employer scheme permit the trustees to apply a multi-annual reduction. (9) The trustees of an unconnected multiple employer scheme may apply a multi-annual reduction to the rate or amount of benefits provided under the scheme provided that— (a) the multi-annual reduction is to be applied in full on or before the third benefit adjustment date beginning with the benefit adjustment date which relates to the actuarial valuation as a result of which the multi-annual reduction is to be applied; (b) the reduction applied in any year of the multi-annual reduction must not be greater than the reduction applied in the previous year of the multi-annual reduction. (10) Except as provided by paragraph (11), the trustees of an unconnected multiple employer scheme must not vary any planned adjustments under a multi-annual reduction after the first benefit adjustment date which relates to the actuarial valuation as a result of which the multi-annual reduction is to be applied. (11) Where there is one or more multi-annual reduction or reductions in effect and a subsequent actuarial valuation results in an increase in the rate or amount of benefits provided under the scheme, the trustees, having obtained the advice of the scheme actuary, must vary one or more multi-annual reduction or reductions then in effect, by applying that increase to offset the planned reduction or reductions under the multi-annual reduction or reductions, which take effect on or after the benefit adjustment date following that valuation. (12) Paragraph (9)(b) does not apply to a multi-annual reduction that has been varied in accordance with paragraph (11). (13) Any offsetting increase pursuant to paragraph (11) must be applied to the remaining years of the multi-annual reduction or reductions so that the total reduction applied in any year of the multi-annual reduction or reductions must not be greater than the total reduction applied in the previous year of the multi-annual reduction or reductions. (14) If an offsetting increase has been applied pursuant to paragraphs (11) and (13) so that a multi-annual reduction has been offset in full, such multi-annual reduction will cease to have effect and, if all multi-annual reductions cease to have effect, any remaining increase must be applied in accordance with the scheme rules made pursuant to paragraph (4)(e) and (f). (15) Where there is a multi-annual reduction in effect and a subsequent actuarial valuation results in a further reduction in the rate or amount of benefits provided under the scheme, that further reduction is to be applied by the trustees, having obtained the advice of the scheme actuary, in addition to the multi-annual reduction which is in effect. (16) Where there is a single multi-annual reduction in effect and a subsequent actuarial valuation results in a further reduction in the rate or amount of benefits provided under the scheme which is to be applied as a multi-annual reduction (the “second multi-annual reduction”)— (a) paragraph (9)(b) does not apply to the second multi-annual reduction; (b) the total reduction applied in any year of the second multi-annual reduction must not be greater than the total reduction applied in the previous year of the second multi-annual reduction. (17) Where there are two (but not more than two) multi-annual reductions in effect and a subsequent actuarial valuation results in a further reduction in the rate or amount of benefits provided under the scheme which is to be applied as a multi-annual reduction (the “third multi-annual reduction”)— (a) paragraph (9)(b) does not apply to the third multi-annual reduction; (b) the total reduction applied in any year of the third multi-annual reduction must not be greater than the total reduction applied in the previous year of the third multi-annual reduction. (18) In this regulation— “benefit adjustment date” means the date set out in the scheme rules on which an adjustment to the rate or amount of benefits provided under the scheme following an actuarial valuation must be applied each year; “relevant accounts”, in relation to an actuarial valuation, are the accounts for the scheme which are prepared in respect of the period ending with the effective date of the actuarial valuation.