Discontinuance valuation meaning

In practice, a discontinuance valuation estimates, for a defined benefit pension scheme, the position on cessation and wind-up: it compares the amount likely to be realised from the scheme’s assets on prompt or forced sale with the cost of securing all accrued benefits in full, usually by purchasing bulk annuities with an insurer (a buy-out). It is typically prepared by the scheme actuary and is used to assess solvency on wind-up, inform employer debt exposure, and plan buy-in/buy-out transactions. This is a descriptive pensions term rather than a defined statutory expression. In England and Wales and Scotland, the liabilities are commonly aligned to the buy-out basis used for calculating the section 75 employer debt under the Pensions Act 1995 and the Occupational Pension Schemes (Employer Debt) Regulations 2005 (with equivalent provisions in Northern Ireland). Asset values are taken as realisable proceeds, net of wind-up and transaction expenses. In Ireland, the concept is applied on scheme wind-up under the Pensions Act 1990 and the Minimum Funding Standard, with liabilities assessed on an insurance buy-out basis and assets measured at realisable value. Usage and purpose are therefore broadly consistent across the UK and Ireland.