Pollock v Reed [2015] EWHC 3685 (Ch)

“Whether, in relation to the proposed transfer of assets and liabilities from HPS to HPS2, the certificate to be issued by the Scheme Actuary under regulation 12(3)(a) of the Preservation Regulations (the “1991 Regs”) can lawfully and properly be granted on the basis that the relevant comparison to be made, when considering whether the transfer credits to be acquired for each member under HPS2 are broadly no less favourable than the rights to be transferred, is between (i) the PPF Benefits that would be payable if HPS entered the PPF on the Transfer Date and (ii) the benefits under the rules of HPS2. If some other comparison is to be made, what is it and how must it be made?”

“(2) Subject to subsections (3) to (5), a scheme may, instead of providing short service benefit, provide – (a) for the member's accrued rights (including any transfer credits allowed under the scheme) – (i) to be transferred to another occupational pension scheme with a view to acquiring transfer credits for the member under the other scheme… … (4) The alternatives specified in subsection (2)(a) and (b) may only be by way of complete or partial substitute for short service benefit – (a) if the member consents; or (b) in such other cases as may be prescribed.”

“(1) For the purposes of section 73(4) of the [Pension Schemes] Act [1993], a scheme may provide for the member's accrued rights to be transferred to another occupational pension scheme (as described in section 73(2)(a)(i) of the Act) without the member's consent where the conditions set out in paragraphs (2) and (3) of this regulation are satisfied. … (2) The condition set out in this paragraph is that the rights of a member are being transferred from the transferring scheme to the receiving scheme and either – (a) the transferring scheme and the receiving scheme relate to persons who are or have been in employment with the same employer; or (b) the transferring scheme and the receiving scheme relate to persons who are or have been in employment with different employers, the member concerned is one of a group in respect of whom transfers are being made from the transferring scheme to the receiving scheme, and either – (i) the transfer is a consequence of a financial transaction between employers; or (ii) the employers are companies or partnerships bearing a relationship to each other such as is described in regulation 64(2) of the Occupational Pension Schemes (Contracting-out) Regulations 1996 (meaning of expression "connected employer"). (3) The condition set out in this paragraph is that – (a) the relevant actuary gives a certification, by completing the certificate in Schedule 3, in relation to the members' rights in the receiving scheme; (b) the relevant actuary sends that certificate to the trustees or managers of the transferring scheme; (c) the transfer takes place within 3 months of the date of the relevant actuary's signature in the certificate; and (d) there are no significant changes to the benefits, data and documents used in making the certificate (see the benefits, data and documents specified in the certificate) by the date on which the transfer takes place. (4) For the purposes of making the certification in paragraph 1 of the certificate in Schedule 3, where long service benefit in the transferring scheme is related to a member's earnings at, or in a specified period before, the time when he attains normal pension age then, in the case of a member in pensionable service at the date of transfer, the value of the rights to be transferred shall be based on pensionable service (including any transfer credits) in the transferring scheme up to that date and projected final pensionable earnings. (4A) For the purposes of [making the certification in paragraph 2 of the certificate in Schedule 3], the [relevant actuary] shall, in considering whether there is good cause, have regard to all the circumstances of the case and in particular – (a) to any established custom of the receiving scheme with regard to the provision of discretionary benefits or increases in benefits; and (b) to any announcements made with regard to the provision of such benefits under the receiving scheme. …”

“…in the opinion of the trustees or administrator of the scheme from which the transfer is made, the transfer credits acquired by the member under the other scheme are at least equal in value to the rights transferred”

“(4) A scheme rule may make provision– (a) in any case where the Board consider it reasonable for such provision to be made for any of the alternatives mentioned in paragraph 1(a)(ii), (e) or (f) to be substituted for short service benefit without the member's consent; (b) for the alternative specified in paragraph 9(2)(a) of Schedule 16 (transfer of member's accrued rights to another scheme) to be provided by way of substitute for short service benefit without the member's consent in any case where (without prejudice to regulation 19(2))– (i) by virtue of regulations made under section 38 of the [Social Security] Pensions Act [1975] provision is made in the Scheme for the member's accrued rights to guaranteed minimum pensions to be transferred to another scheme without his consent;” (a) in any case where the Board consider it reasonable for such provision to be made for any of the alternatives mentioned in paragraph 1(a)(ii), (e) or (f) to be substituted for short service benefit without the member's consent; (b) for the alternative specified in paragraph 9(2)(a) of Schedule 16 (transfer of member's accrued rights to another scheme) to be provided by way of substitute for short service benefit without the member's consent in any case where (without prejudice to regulation 19(2))– (i) by virtue of regulations made under section 38 of the [Social Security] Pensions Act [1975] provision is made in the Scheme for the member's accrued rights to guaranteed minimum pensions to be transferred to another scheme without his consent;”

“(7) In any case where the rules of the scheme make provision for the alternative specified in paragraph 9(2)(a) of Schedule 16 (transfer of member's accrued rights to another scheme with a view to the acquisition for him of transfer credits under the other scheme) to be substituted for short service benefit without the member's consent (whether under paragraph 4(b)(i) or regulation 19(2)), they shall also contain provisions requiring the trustees or managers of the scheme to be reasonably satisfied that where, on the date when the accrued rights are transferred, the circumstances specified in paragraph (9) obtain, the payment made by them to the trustees of the other scheme equals or exceeds the value specified in paragraph (10). … (10) The value mentioned in each of paragraphs (5) to (7) is– (a) where the alternative is by way of complete substitute for short service benefit, the value, on the date mentioned in that paragraph, of any benefits which have accrued to or in respect of the member in question under the applicable rules; (b) where the alternative is by way of partial substitute for short service benefit, the value, on that date, of the relevant part of any benefits which have so accrued.” (a) where the alternative is by way of complete substitute for short service benefit, the value, on the date mentioned in that paragraph, of any benefits which have accrued to or in respect of the member in question under the applicable rules; (b) where the alternative is by way of partial substitute for short service benefit, the value, on that date, of the relevant part of any benefits which have so accrued.”

“(1) For the purposes of paragraph 9(3) of Schedule 16 [of the Social Security Act 1973], a scheme may provide for the member's accrued rights to be transferred to another occupational pension scheme (as described in paragraph 9(2)(a) of Schedule 16) without the member's consent where– (a) the scheme is being wound up and the transfer is to another scheme that applies to employment with the same employer; or (b) the conditions set out in paragraphs (2) and (3) of this regulation are satisfied. … (3) The condition set out in this paragraph is that an actuary certifies to the trustees or managers of the transferring scheme that the transfer credits to be acquired for the members under the receiving scheme are at least equal in value to the rights to be transferred. (4) When calculating the value of any rights for the purposes of this regulation, the actuary must comply with the requirements of sub-paragraphs (a) and (b), namely– (a) the actuary must value all benefits that have accrued to or in respect of the members under the applicable rules and, for members in service at the date of transfer, the value of those benefits must be based on pensionable service in the transferring scheme up to that date and projected final pensionable earnings; and (b) where it is the established custom for additional benefits to be awarded from the transferring scheme at the discretion of the trustees or the employer, the actuary must take into account the value of any such additional benefits as will accrue to the members in question if the custom continues unaltered.” (a) the scheme is being wound up and the transfer is to another scheme that applies to employment with the same employer; or (b) the conditions set out in paragraphs (2) and (3) of this regulation are satisfied. (a) the actuary must value all benefits that have accrued to or in respect of the members under the applicable rules and, for members in service at the date of transfer, the value of those benefits must be based on pensionable service in the transferring scheme up to that date and projected final pensionable earnings; and (b) where it is the established custom for additional benefits to be awarded from the transferring scheme at the discretion of the trustees or the employer, the actuary must take into account the value of any such additional benefits as will accrue to the members in question if the custom continues unaltered.”

“Draft Regulation (3)(a) 3. We support the suggestions made by several organisations that the regulation should make it clear that the comparison of values should be for each member, and not for the group as a whole. We suggest that clarification is necessary so that there is only need to ensure there is broad equivalence of benefits; it should not be essential for each element in the benefit package to be exactly the same as that element in the new scheme. 4. We suggest the wording should be amended to the ‘transfer credits to be acquired for each member under the receiving scheme are broadly equivalent to the rights to be transferred’.”

“(3) The condition set out in this paragraph is that an actuary certifies to the trustees or managers of the transferring scheme that– (a) the transfer credits to be acquired for each member under the receiving scheme are, broadly, no less favourable and, if that scheme were wound up immediately after the transfer, would not be likely to be materially less secure than they would be if the transferring scheme were wound up immediately before the transfer than the rights to be transferred; and (aa) no beneficiary or contingent beneficiary under the transferring scheme will receive materially inferior benefits in the receiving scheme; and (b) where it is the established custom for discretionary benefits or increases in benefits to be awarded under the transferring scheme, there is good cause to believe that the award of discretionary benefits or increases in benefits under the receiving scheme will (making allowance for any amount by which transfer credits under the receiving scheme are more favourable than the rights to be transferred) be, broadly no less favourable.”

“These Regulations further amend regulation 12 of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 in respect of the matters which are required to be certified by an actuary before the accrued rights of a member of an occupational pension scheme (“the transferring scheme”) may be transferred to another such scheme (“the new scheme”) without that member's consent. The amendments require that, where the transferring scheme is one which must have a scheme actuary, it is that actuary who must provide any certificate for the purposes of regulation 12; and they remove the requirement for certification as respects the security of a member's rights, and the benefits which will be received, in the new scheme.”

“Attended with advantage or convenience; facilitating one's purpose or wishes; advantageous, helpful, suitable.”

“(3) For the purposes of this section, a scheme satisfies the statutory standard if the pensions to be provided for such persons are broadly equivalent to, or better than, the pensions which would be provided for such persons under a reference scheme. (4) Regulations may provide for the manner of, and criteria for, determining whether the pensions to be provided for such persons under a scheme are broadly equivalent to, or better than, the pensions which would be provided for such persons under a reference scheme. (5) Regulations made by virtue of subsection (4) may provide for the determination to be made in accordance with guidance prepared from time to time by a prescribed body. (6) The pensions to be provided for such persons under a scheme are to be treated as broadly equivalent to or better than the pensions which would be provided for such persons under a reference scheme if and only if an actuary (who, except in prescribed circumstances, must be the actuary appointed for the scheme in pursuanceof section 47 of the Pensions Act 1995) so certifies.”

“The general principles are that the members who are to be transferred will acquire past service rights (including any additional benefits) in the receiving scheme at least broadly equivalent to those rights (including any additional benefits) given up in the transferring scheme and that there will not be a significant loss of security for members being transferred.”

“2.8 In giving the certificate, the actuary needs to take into account the financial strengths of the transferring and receiving schemes but only to the extent that the financial strengths affect the rights and any discretionary benefits or increases in benefits of the transferring members. The actuary should make it known to the trustees that he has taken no account of the financial strengths of the principal and participating employers in giving the certificate.”

“47 On behalf of the drivers, Mr Etherton contended that the amendment contained in the deed reflecting the alleged binding pensions agreement would fall foul of Article 6(1), and would therefore be of no effect. His argument proceeds as follows. Each driver who was employed by the Board is ‘a protected person’, and his ‘relevant pension rights in his designated scheme’ are the pension rights, as defined in paragraph 6(3), which, as at 31 May 1994, he had under the BRPS. As at 31 May 1994 under the BRPS he had the right to have his pension assessed at a figure fixed by reference to his years of service as a driver and the whole of his ‘Final Average Pay’, which effectively means the whole of his Pay in his final year of service. In other words his pension was to be based on the whole of his final year’s salary. The amendment effected by the deed would result in his pension being based only on a proportion of that salary; accordingly it would fall foul of Article 6(1). In other words, the effect of the proposed amendment, so far as years of service before restructuring are concerned, would be to fix a driver’s pension by reference to his previous Pay of £11,950 subject to increase, and not his actual Pay of £25,000 subject to increase; and, so far as years of service after restructuring are concerned, it would be to fix his pension on the basis of £18,000 subject to increase, rather than his actual Pay of £25,000 subject to increase. In these circumstances, he contends that each protected driver’s ‘relevant pension rights’ under the RPS, if it were made the subject of the proposed amendment would become ‘less favourable’ than that driver’s relevant pension rights’ under the BRPS. 48 It appears to me that this argument falls foul of practical common sense. The combined effect of Article 6(1) and paragraph 6(2) and (3) is to require one to compare the pension rights, which a protected person will have immediately after a proposed amendment to the new scheme, with the pension rights which he had on 31 May 1994 under the old scheme. As at 31 May 1994, each driver had a right to a pension at a figure based on his period of service and his pay, which was then £11,000 subject to increase and not on his allowances which were an average of £11,000 per annum. The effect of the proposed amendment would be, at least on the face of it: (1) to retain those pension rights so far as pension is assessed by reference to the period of service before restructuring, as the pension will be based on £11,950 subject to increase which, in January 1997 terms, is similar to £11,000 subject to increase in May 1994; and (2) to improve those pension rights substantially so far as any period of service after re-structuring is concerned, because the pension will be calculated on the basis of £18,000 subject to increase (rather than £11,000 or £11,950 per annum subject to increase). 49 However, while practical common sense should not be ignored, the correctness of the argument must ultimately turn on the construction of the 1994 Order, and Schedule 11 under which it was made. 50 Mr Etherton contended that, on the proper construction of Schedule 11 and of the Order, it is not permissible to look at the matter in this (as I see it, practical) way; one has to confine oneself substantially to the terms of the two pension schemes, and not to figures outside the scheme. I do not consider that is correct. Before turning to the detailed consideration of the provision of Schedule 11 and the 1994 Order, it is illuminating to consider the way in which the deed has in fact been drafted. The deed distinguishes between ‘basic pay’ (£11,950 per annum as at present) and the balance of the total pay (being £13,050 per annum as at present) of which part (namely £6,050 per annum as at present) is ‘Restructuring Premium’. Accordingly, under the BRPS, a driver’s pension was calculated by reference only to his ‘Pay’, both in respect of past and future years of service, whereas, under the RPS as amended, his pension would be calculated by reference to ‘Basic Pay’, for past service but is calculated by reference to the aggregate of ‘Basic Pay’ and ‘Restructuring Premium’ in respect of the period after restructuring. 51 One could only compare a pension based on ‘Basic Pay’ and ‘Restructuring Premium’ in the RPS as amended, with a pension based on Pay under the BRPS by going outside the terms of the two schemes and looking at the figures. That is inevitable once the terms, definitions and/or basis of assessment of the new scheme are different from those of the old scheme. Either any such amendment is impermissible in principle under Article 6(1), which seems unlikely, or one must, contrary to Mr Etherton’s submissions, look at the figures. 52 To much the same effect, Mr Christopher Nugee, on behalf of Mr Butler, raised the question as to how one could see if an amendment fell foul of Article 6(1) if, for instance, it involved replacing Rule 5A(2)(i) of the Section with ‘1/75th of Final Average Pay’; one would have to consider whether that was ‘less favourable’ than the present ‘1/60th of Final Average Pay less 1/40th of Final Average Basic State Pension’. In order to do that one would inevitably have to go outside the four corners of the deed to discover the level of state pension. Mr Etherton, to my mind quite rightly, accepted that such an amendment would be permissible if it could be shown to be ‘no less favourable’: so too, if the Trustee decided to change an income provision in the RPS (mirroring the BRPS) to a combination of a capital payment and reduced income. If that is right, it seems to me that it must be unexceptionable to look outside the four corners of the BRPS, and of the RPS as amended, in order to discover, on the figures, whether the drivers’ relevant pension rights under the RPS, as amended, would be ‘less favourable’ than their relevant pension rights under the BRPS as at 31 May 1994. 53 Turning to the provisions of Schedule 11 and the 1994 Order, I consider that, as a matter of construction, Mr Etherton is not correct in contending that the terms of Schedule 11 and the 1994 Order prevent one from looking outside the terms of the two schemes in order to see if one is 'less favourable' than the other. In its desire to protect pension rights of employees of the Board on privatisation, the legislature is likely, in my view, to have been concerned to protect practical rights sounding in money as opposed to more hypothetical legal or conceptual rights. It seems to me that clear words would be required before the court should be persuaded that, when deciding whether a person's pension rights are 'less favourable' than before, it should be confined to comparing different provisions in different pension schemes, rather than looking at the differences between the financial results under the two schemes…”

“Draft Regulation (3)(a) 3. We support the suggestions made by several organisations that the regulation should make it clear that the comparison of values should be for each member, and not for the group as a whole. We suggest that clarification is necessary so that there is only need to ensure there is broad equivalence of benefits; it should not be essential for each element in the benefit package to be exactly the same as that element in the new scheme. 4. We suggest the wording should be amended to the ‘transfer credits to be acquired for each member under the receiving scheme are broadly equivalent to the rights to be transferred’.”

“D.BULK TRANSFERS WITHOUT CONSENT 1. Some commentators have suggested that there is some inconsistency between the wording of Regulation 12(3) of the Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 (SI 1991/167) and the actuarial Guidance Note GN16 on bulk transfer values. The aim is to lay an amending regulation in the New Year so that the requirements of secondary legislation dovetail more precisely with GN16. The amending legislation would come into effect in April 1997. 2. It is proposed that: (a) Regulation 12(3)(a) of the Preservation of Benefit Regulations 1991 is amended to clarify the original policy intention which is to ensure that no member, beneficiary or contingent beneficiary receives a materially inferior benefit in the receiving scheme following a bulk transfer without the members consent. (b) that an additional requirement is inserted into Reg 12(3), namely that the actuary is satisfied that there will not be a significant loss of security for members being transferred.” (a) Regulation 12(3)(a) of the Preservation of Benefit Regulations 1991 is amended to clarify the original policy intention which is to ensure that no member, beneficiary or contingent beneficiary receives a materially inferior benefit in the receiving scheme following a bulk transfer without the members consent. (b) that an additional requirement is inserted into Reg 12(3), namely that the actuary is satisfied that there will not be a significant loss of security for members being transferred.”

“4. As explained in Annex D to my letter of 19 November, the aim of the proposed amendment is simply to make it quite clear that actuarial Guidance Note GN16 is consistent with the wording of regulation 12, and with the underlying policy intention. 5. Turning to the detailed points listed under (a) in your letter … Sixth indent As already explained, it is settled policy that protection should not be confined to value in circumstances of no-consent bulk transfer. … 6. Moving on to your comments about the “Security” aspect, covered in the indents to your section (b), you seem to be saying that no regard should be paid to loss of security. I am afraid we do not agree: we feel that a comparison of members’ security in the two schemes is entirely appropriate. Neither do we believe that the proposed wording of this amendment should widen the position beyond the existing scope of GN16. The amendment puts the policy intention beyond doubt.”

“… The policy intention is to align regulations more closely with the professional actuarial guidance note (GN16) that deals with bulk transfers. The latter, as currently drafted, accurately reflects the policy intention but some commentators have suggested that the guidance note imposes more onerous requirements than the legislation intended.”

“(1) Subject to subsection (2) and section 101E, a person's pension credit benefit under a scheme must be – … (c) payable directly out of the resources of the scheme, or (d) assured to him by such means as may be prescribed. (2) Subject to subsections (3) and (4), a scheme may, instead of providing a person's pension credit benefit, provide– (a) for his pension credit rights under the scheme to be transferred to another occupational pension scheme or a personal pension scheme with a view to acquiring rights for him under the rules of the scheme, or (b) for such alternatives to pension credit benefit as may be prescribed. (3) The option conferred by subsection (2)(a) and (b) is additional to any obligation imposed by Chapter II of this Part. (4) The alternatives specified in subsection (2)(a) and (b) may only be by way of complete or partial substitute for pension credit benefit- (a) if the person entitled to the benefit consents, or (b) in such other cases as may be prescribed.” … (c) payable directly out of the resources of the scheme, or (d) assured to him by such means as may be prescribed. (a) for his pension credit rights under the scheme to be transferred to another occupational pension scheme or a personal pension scheme with a view to acquiring rights for him under the rules of the scheme, or (b) for such alternatives to pension credit benefit as may be prescribed. (a) if the person entitled to the benefit consents, or (b) in such other cases as may be prescribed.”

“Subsection (4) mirrors the provisions to protect early leavers in section 73(4) of the Pension Schemes Act 1993. We intend to use the regulation-making power to prescribe conditions similar to those set out in regulation 12(3) of the Preservation of Benefit Regulations,which rely on actuarial certification to ensure that pension credit benefits are adequately protected and secure if transferred without the consent of the former spouse.”

“In giving the certificate, the actuary needs to take into account the financial strengths of the transferring and receiving schemes and of the principal and participating employers but only to the extent that the financial strengths affect the rights (including any additional benefits) of the transferring members.”

“478. Mr Spink says this explicit and unequivocal statement that a debt is triggered if an employer ‘ceases to have any employees in pensionable service to which the scheme applies’ is a legitimate aid to construction: see for instance R (Confederation of Passenger Transport UK) v Humber Bridge Board [2003] EWCA Civ 842, [2004] QB 310 at [48]-[50] per Clarke LJ (with whom the rest of the Court agreed) holding that explanatory notes could be used ‘to help decide both whether any words were omitted from [a statutory instrument] and, if so, what those words were’ and concluding at [52] that ‘the explanatory note … makes it clear beyond a peradventure what was intended’. 479. I do not doubt that, in appropriate circumstances, an Explanatory Note of this sort relating to a statutory instrument can be used as an aid to construction. Although not part of the instrument, the note ‘is of use in identifying the mischief which the regulations were attempting to remedy’: see Bennion on Statutory Interpretation (5th edition, 2008) at p265-266, citing Coventry and Solihull Waste Disposal Co Ltd v Russell (Valuation Officer) [1999] 1 WLR 2093 at 2103D-G. But like all aids to construction, it must be used with care. The note cannot be used, in my view, to create an ambiguity where none exists: if the meaning of the instrument is clear, a note which ascribes to the text a different meaning is not capable of overriding the clear meaning nor capable of creating an ambiguity where none exists. Similarly, if any ordinary meaning of the words used leads to an absurd conclusion (as in the Confederation of Passenger Transport UK case), or if it is clear that the draftsman has simply omitted something, the note can be referred to in order to produce a construction which eliminates the absurdity or fills the gap. But even in such a case, it must be possible to arrive at the end result by a process of construction (including the implication of terms). The Court cannot simply rewrite the legislation. 480. A note can therefore be used as an aid. But there may be other factors pointing to a construction inconsistent with the note in which case the conclusion may be that the draftsman of the note has misunderstood the meaning of the instrument. Alternatively, the note may reflect the intention of the sponsoring department which has not been effectively reflected in the text of the instrument.”

“516. It is no doubt true that papers of this sort are admissible in evidence: see Craies on Legislation (9th edition, 2008) at paragraph 27.1.11 and Melville Dundas Ltd v George Wimpey UK Ltd [2007] UKHL 18, [2007] 1 WLR 136 at [65], per Lord Neuberger. However, it is rare that such papers, being after all only consultations, will point conclusively to a particular interpretation. Further, a consultation which expressed a view about the existing statutory provisions cannot affect the proper interpretation of such provisions. 517. In the present case, I can attach no significance at all to that statement on which Mr Spink relies. At most, it represents a departmental view about what the existing legislation means. But it acknowledges (inevitably), by using the word clarify, that there is a doubt. I do not know the basis for this departmental view, in particular I do not know whether it is a view expressed about the meaning of Regulation 6(4) alone or whether the view about the meaning of that provision is premised on the same approach being adopted to the key phrase in the earlier legislation and in the definition of ‘the employer’ in section 124. That the department may want, from their current policy perspectives, to reach the position for the past which they have now reached by new Regulations, I can understand. Their expressed views are quite probably driven in part by the desire. It is, in any case, for me to determine, as a matter of law, what these provisions mean and the views of the department carry little weight.”

“(1) This section applies where an occupational pension scheme to which section 73 applies is being wound up. (2) During the winding up period, the trustees or managers of the scheme– (a) must secure that any pensions or other benefits (other than money purchase benefits) paid to or in respect of a member are reduced, so far as necessary, to reflect the liabilities of the scheme to or in respect of the member which will be satisfied in accordance with section 73, and (b) may, for the purposes of paragraph (a), take such steps as they consider appropriate (including steps adjusting future payments) to recover any overpayment or pay any shortfall…”

“(1) The liabilities of a scheme to which section 73 applies and their amount or value must be determined, calculated and verified by the actuary of the scheme— (a) on the assumption that any questions relating to any person's entitlement to a pension or other benefit are to be determined as at the crystallisation date; (b) on the assumption that liabilities in respect of pensions or other benefits will be discharged by the purchase of annuities of the kind described in section 74(3)(c) (discharge of liabilities: annuity purchase) and include the expenses involved in discharging them; (c) subject to sub-paragraph (b) and paragraph (4), on the general assumptions specified in regulations 7(2), (3) and (7) to (10) and 8(2) of the MFR Regulations (determination and valuation of liabilities and further provisions as to valuation: methodology, assumptions, etc.) so far as they relate to the calculation and verification of liabilities; and (d) otherwise in accordance with any relevant FRC standards.” (2) For the purpose of paragraph (l)(b) the actuary must estimate the cost of purchasing the annuities. . . . . (5) Paragraph (6) applies if, when the assets of the scheme are applied in accordance with section 73(3) towards satisfying any liability of the scheme mentioned in section 73(4), that liability, as calculated in accordance with the rules of the scheme (without any reduction by reason of its falling within a class of liability which is to be satisfied after another class), is in the opinion of the actuary fully satisfied by applying assets of a value less than the amount of that liability calculated in accordance with paragraph (1). (6) If this paragraph applies the amount to be taken as the amount of that liability for the purposes of section 73(3) is to be reduced accordingly.”

“(2) After the payment of any benefits which have already fallen due to be paid (including the distribution of lump sum death benefits) before the Termination Date, and after payment of all costs, charges and expenses of and incidental to the administration of the Scheme which have either fallen due before the Termination Date or which are incurred in the winding-up, and which in the Trustees’ opinion cannot be recovered from the Participating Employers under rule 12.2(2), the Trustees must use the Scheme’s assets to secure the benefits payable under the Scheme in the following order of priorities (subject to section 73 of the Pensions Act 1995 and in accordance with one or more of the methods in rule 15.6):- … (5) No assets shall be applied to provide benefits specified in any category set out in (2) above unless the liabilities of the preceding category have been fully discharged and to the extent that the remaining assets are not sufficient to discharge the liabilities of any category the benefits to be provided shall be reduced proportionately.” (1). If the assets of the Scheme are insufficient to secure the benefits in full under rule 15.3 the Trustees shall invite the Participating Employers to make such contributions to the Scheme as may be required to secure the benefits in full, and in the same proportions as though the contributions were an ordinary contribution under rule 3.4. (2). The Trustees shall then secure benefits, so far as the Scheme assets permit, in the order of priority under rule 15.3. Any benefits not secured in full shall be secured on a proportionately reduced basis as determined by the Trustees on the advice of the Actuary. (3). Sections 75 and 75A of the Pensions Act 1995 (and regulations made under those sections) shall then apply to the Scheme as appropriate.”