Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Liabilities definition

What does Liabilities mean? In practice, a scheme’s liabilities are what it owes: the future benefit payments (for example, pensions and lump sums) and the scheme’s expenses. They are usually measured as the present value of expected cashflows, determined by an actuary using assumptions on discount rate, longevity, inflation and expenses. Comparing liabilities with the market value of assets gives the funding level: a deficit arises where liabilities exceed assets; a surplus where assets exceed liabilities. “Liabilities” is a descriptive term used across legal, actuarial and accounting contexts rather than a single statutory definition. However, valuation bases are prescribed for particular purposes. In...

Defined Benefit Pension Incentive Exercises: The Pensions Regulator’s Expectations, Industry Code, Boundary Examples and Legal Duties for Employers, Trustees and Advisers

Published by a LexisNexis Pensions expert

Practice notes

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While pension scheme incentive exercises enable employers to control and reduce liabilities within defined benefit (DB) arrangements, they can also pose risks to the interests of beneficiaries. Their legitimacy has been queried by The pensions regulator and by scheme trustees.

Regulatory framework

A code of good practice on incentive exercises (the Code) was produced by the pensions community’s Industry Working Group. Although voluntary, the Code indicates that where advisers are uneasy about conducting an incentive exercise, such concerns ought to be notified to The Pensions Regulator. The Code first appeared in June 2012, was refreshed in February 2016 (with the updated version applying to member offers made thereafter), and was accompanied by a suite of boundary examples. In November 2019, stewardship of the Code was, in effect, transferred to The Pensions Regulator, though it is uncertain whether the Regulator will continue to maintain it. For more detail, see: Status of the Code below. In July 2012, The Pensions Regulator also issued a statement on incentive exercises aimed at employers contemplating such activity, the trustees of the affected DB schemes, and the professionals advising them...

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Wyn Derbyshire

gunnercooke LLP

Wyn is a partner at gunnercooke LLP and specialises in pensions, trust and employment law in all industry sectors, dealing with the transactional, advisory and documentation aspects.He also has wide experience of the pensions implications of heavyweight corporate transactions and flotations, the issues arising from the establishment and merger of pension schemes, and sex equalisation and other discrimination issues in respect of benefits provided by pension schemes. In addition, he provides advice to pension scheme trustees generally.Recent transactions include advising Amcor on pension matters relating to the acquisition of Alcan business and the acquisition of Northern Foods PLC by Boparan Holdings.He is a co-author (with Stephen Hardy and Stephen Maffey) of TUPE: Law and Practice, published by Spiramus Press (now in its 4th edition), and co-author (with Stephen Hardy and David Wicks) of Money & Work, published by Spiramus Press in August 2007. He has also...

Web page updated on 21/05/2026

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