Transformation Appendix

Transcription

1 Transfrmatin Appendix Summary This is the Transfrmatin Appendix t the Bard s Determinatin under Sectin 175(5) f the Pensins Act 2004 in respect f the 2018/19 Levy Year (the Determinatin ). It prvides the frmulae fr transfrming Sectin 179 Valuatin results fr the purpse f calculating the Levies in respect f the 2018/19 Levy Year. The transfrmatin invlves: transfrming any Sectin 179 Valuatin results as at a date ther than 31 March 2018 n t a Sectin 179 basis as at 31 March 2018, using versin A8 f the valuatin assumptins guidance; mving the assets and liabilities frward (r backwards) frm the date f the Sectin 179 Valuatin t 31 March 2018; adjusting the Sectin 179 Valuatin s as t exclude any value attributed t an ABC Arrangement; adjusting the results t reflect smthed market cnditins, calculated by averaging market data ver five years t 31 March 2018; and applying stress factrs t adjust the assets and liabilities t reflect their sensitivity t specified shcks in ecnmic cnditins. A similar transfrmatin (with the final step abve mitted) is used t calculate smthed but unstressed asset and liability values. The frmulae have been develped by the Bard t transfrm valuatin results which have been Submitted at the Measurement Time r therwise prvided t the Bard in accrdance with the Rules int valuatin results as at 31 March 2018 (the Output Date ), n: a smthed and stressed Sectin 179 basis); and a smthed but unstressed Sectin 179 basis. Fr the purpses f this Appendix, Input Date is the effective date f the Sectin 179 Valuatin r MFR Valuatin f the Scheme as is used under Rule D2 f the Determinatin, r, in a case t which Parts F1-F3 f the Rules apply, t the relevant Pst-Transfer Valuatin. This Appendix als cvers the transfrmatin f Cntingent Asset valuatins fr the purpse f calculating the Levies in respect f the 2018/19 Levy Year. 1 Backgrund 1.1 The mst recent Sectin 179 Valuatin Submitted as at the Measurement Time will be used, as described in this Appendix, t assess the Scheme s funding psitin n the smthed and (where applicable) stressed Sectin 179 bases as at 31 March If a Scheme failed t submit a Sectin 179 Valuatin by this deadline but the Bard has an MFR Valuatin in respect f it, then the funding psitin as at 31 March 2018 will be calculated as described in the MFR Cnversin Appendix. 1.2 The Sectin 179 Valuatin result prvided may have been prepared in accrdance with an earlier versin f the valuatin assumptins guidance than versin A8 (depending n the effective date f the Sectin 179 Valuatin and the date n which it was certified) and this is taken int accunt in the transfrmatin frmulae. Where the Sectin 179 Valuatin results have been prepared in accrdance with different versins f the valuatin methdlgy guidance (fr example G6 cmpared t G7), the Bard has decided that n allwance will be made in the transfrmatin frmulae t accunt fr any change in methdlgy. Pensin Prtectin Fund 1 December 2017

2 1.3 The transfrmatin mdel nly uses infrmatin abut each Scheme as taken frm Exchange tgether with data n investment market cnditins. 2 Summary f the calculatin 2.1 The frmulae cnstitute a technical actuarial dcument which is intended t be read nly by thse with significant experience in carrying ut actuarial calculatins. Fr thse with a brad interest in the cnversin methdlgy, the main stages f the calculatins are summarised belw. 2.2 Transfrmatin f the value f the prtected liabilities n the Sectin 179 basis as at the Input Date t the value f the liabilities n the smthed and stressed Sectin 179 basis as at the Output Date, using versin A8 f the valuatin assumptins guidance: The Sectin 179 methdlgy prescribes an allwance fr expenses. Where the liabilities excluding expenses are nt explicitly identifiable (e.g. where, exceptinally, the Bard has t use data taken frm an ld versin f the Scheme Return) then remving this allwance is the first stage in transfrming the liabilities. The frmulae then use figures fr the prprtins f liabilities that relate t service befre 6 April 1997, between 6 April 1997 and 5 April 2009 (bth dates inclusive) and after 5 April 2009 taken, where pssible, frm data Submitted as at the Measurement Time, t allw fr differences in PPF cmpensatin fr service attributable t these respective perids. Where these figures have nt been given, assumptins are made. Ratis f annuity factrs and deferred annuity factrs are then used t cnvert the adjusted Sectin 179 liabilities t liabilities n smthed and stressed Sectin 179 assumptins as at the Output Date, using versin A8 f the valuatin assumptins guidance. 2.3 Mving assets and the liabilities frward (r backwards) frm the date f the Sectin 179 Valuatin t the Output Date: The assets (excluding any value attributed t an ABC Arrangement) are assumed t achieve returns in line with certain smthed indices, allwance being made fr hw much f the Scheme s assets are invested in equities, bnds etc. as Submitted as at the Measurement Time. Liabilities are increased (r decreased) at rates that are reasnably cnsistent with smthed and stressed Sectin 179 assumptins, as the liabilities are nw clser t (r further away frm) cming int payment. As a cnsequence f smthing market cnditins ver a five year perid, the transfrmed asset value has an effective valuatin date at the mid pint f the averaging perid. Fr cnsistency the liability value at the Output Date is mved frward (r backwards) t the same pint. Neither assets nr liabilities are adjusted fr benefit payments. Liabilities are nt adjusted fr new benefit accrual, nr are assets adjusted fr cntributins. The cmparatively shrt perid between the Sectin 179 Valuatin effective date and the Output Date shuld mean that any inaccuracies arising frm this are small. Separate certificatin f Deficit- Reductin Cntributins shuld be cnsidered where these may materially affect the result. 2.4 The expenses specified fr Sectin 179 calculatins are added t the liabilities t give the ttal liability value. 2.5 The smthed asset values are multiplied by stress factrs t reflect their sensitivity t specified shcks in ecnmic cnditins, e.g. interest rates and equity prices. Pensin Prtectin Fund 2 December 2017

3 2.6 The unstressed values f assets and liabilities are calculated in a similar way t the smthed and stressed values, but: withut the applicatin f the stress factrs t the smthed asset value; cnverting the liabilities using annuity factrs and deferred annuity factrs which reflect smthed but unstressed Sectin 179 assumptins as at the Output Date; and mving the liability value frward (r backwards) frm the date f the Sectin 179 Valuatin at rates that are reasnably cnsistent with smthed but unstressed Sectin 179 assumptins. Pensin Prtectin Fund 3 December 2017

4 3 Summary f utputs frm and inputs t the frmulae 3.1 Outputs Effective date f the asset and liability valuatins required fr utput (31 March 2018) OutputDate Smthed and stressed asset value S179Ass Smthed and stressed ttal liabilities (including Sectin 179 expense allwance) S179TL 3.2 Inputs The Sectin 179 Valuatin results Submitted as at the Measurement Time: Assets fr Sectin 179 Valuatin S179InputAss Prprtin f assets held in the frm f insurance cntracts nt included in scheme accunts S179InputInsPpn Date f relevant accunts giving asset figure RelAcDate Effective date f the Sectin 179 valuatin S179InputDate Liabilities fr pensins in payment, pssibly including expenses Liabilities fr deferred members, pssibly including expenses Liabilities fr active members, pssibly including expenses Estimated csts f wind-up (excluding benefit installatin/payment) S179InputPL S179InputDL S179InputAL S179InputWUExp Estimated expenses f benefit installatin/payment S179InputPayExp External liabilities S179InputExLiab Ttal value f prtected liabilities S179InputTL Prprtin f pensiner liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f deferred pensiner liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f deferred pensiner liabilities, excluding expenses, relating t service between 6 April 1997 and 5 April 2009 Prprtin f active member liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f active member liabilities, excluding expenses, relating t service between 6 April 1997 and 5 April 2009 S179InputPPre97Ppn S179InputDPre97Ppn S179InputD97_09Ppn S179InputAPre97Ppn S179InputA97_09Ppn Pensin Prtectin Fund 4 December 2017

5 Versin number f Sectin 179 assumptins used fr this valuatin Ttal number f pensiner members PMemN S179InputAssVN Ttal number f deferred pensiner members DMemN Ttal number f active members AMemN Pensiner members average age PAvAge Deferred members average age DAvAge Active members average age AAvAge Where membership numbers are nt included in the Sectin 179 Valuatin results Submitted as at the Measurement Time, the ttal membership number may be determined frm a different surce. Ttal membership number TtMemN Scheme asset infrmatin Submitted as at the Measurement Time percentages f the ttal assets as at the date f the mst recently audited scheme accunts (referred t as AssetDate belw). Nte that this may be different frm bth the S179InputDate and the RelAcDate identified abve. Generally, the value f assets at AssetDate is nt Submitted, and it may be rather different frm S179InputAss where, fr instance, a bulk transfer has taken place. Bnds Equities Prperty Prprtin f bnds which are fixed interest gvernment bnds Prprtin f bnds which are fixed interest nn-gvernment bnds Prprtin f bnds which are inflatin-linked bnds Prprtin f equities which are UK quted equities Prprtin f equities which are verseas quted equities Prprtin f equities which are unquted equities/private equity Insurance funds Deferred r immediate fully insured annuities Hedge funds Cash and net current assets Cmmdities ABC Arrangement Other Date f asset breakdwn B% G% NG% Pensin Prtectin Fund 5 December 2017 IL% Eq% UK% OS% PE% Pr% In% An% He% Ca% C% ABC% Ot% AssetDate

6 Schemes with s179 prtected liabilities f 1.5 billin r mre are required t carry ut a bespke stress analysis n their asset allcatin and t Submit the results by the Measurement Time. Other schemes have the ptin t Submit a bespke stress analysis n a vluntary basis. Such calculatins shuld be carried ut as at the date f the mst recently audited scheme accunts (i.e. the AssetDate abve) and with reference t the Investment Risk Appendix and the Investment Risk Guidance. Stressed value f assets calculated frm bespke stress analysis as at date f the mst recently audited scheme accunts 1 Unstressed value f assets as at date f the mst recently audited scheme accunts 2 BespkeStr BespkeUnStr Fr schemes with an ABC Arrangement, Part A f the Rules sets ut the value f the ABC Arrangement that will be remved frm the assets prir t calculating underfunding, the s179 ABC Amunt. Fr the avidance f dubt, where the Bard is satisfied that n value has been attributed t an ABC Arrangement in the assets used fr the Sectin 179 r MFR Valuatin that is used under Rule D2 r, in a case t which Parts F1-F3 f the Rules apply, the relevant Pst-Transfer Valuatin (whether because the ABC Arrangement was entered int after the effective date f the relevant valuatin r therwise), the s179abcamunt shall be zer. s179 ABC Amunt, as defined in Part A f the Rules s179abcamunt Nrmal Pensin Age data taken frm the scheme return data: Nrmal Pensin Age in respect f pre-6 April 1997 benefits Nrmal Pensin Age in respect f benefits accrued between 6 April 1997 and 5 April 2009 Nrmal Pensin Age in respect f pst-5 April 2009 benefits NPAPre97 NPA97_09 NPAPst09 Where any f the infrmatin in this sectin 3 has nt been prvided r is nt in the frm that the Bard requires r is incnsistent, the Bard will need t make assumptins. Details f the assumptins that will be made in these circumstances are set ut in sectin 5 f this dcument. Nte als that average ages falling utside particular ranges will be subject t adjustment (see sectin 5 f this dcument fr details). 4 The frmulae 4.1 Smthing Asset and liability values are smthed based n market cnditins ver a five year perid up t the Output Date. This is achieved by smthing the underlying yields that feed int the liability transfrmatin and smthing the indices that feed int the asset transfrmatin. 1 Updated n 1 March Updated n 1 March 2018 Pensin Prtectin Fund 6 December 2017

7 Smthed yields and indices as at the Output Date shuld be determined as the arithmetic mean f the end f day values fr each day excluding weekends ver the five year perid ending n the last such day preceding r cincident with the Output Date. Where n published yield r index is available fr a particular day (fr example Bank Hlidays r indices published n a mnthly basis), the mst recent yield r index available n that day shall be used. 4.2 Stress factrs Liability stress factrs Interest rate stress factr IntStrFac -0.75% Inflatin stress factr InflnStrFac -0.14% The inflatin stress factr abve represents the difference between a real rate stress factr f -0.61% and a nminal rate stress factr f -0.75% (equivalent t the interest rate stress factr), prducing a negative result f -0.14%. Asset stress factrs Fixed interest gvernment bnds GStrFac +15% Fixed interest nn-gvernment bnds NGStrFac +3% Inflatin-linked bnds ILStrFac +15% UK quted equities UKStrFac -19% Overseas quted equities OSStrFac -16% Unquted equities / private equity PEStrFac -19% Prperty PrStrFac -5% Insurance funds InStrFac -19% Annuities AnStrFac +16% Hedge funds HeStrFac -3% Cash CaStrFac +0% Cmmdities CStrFac -14% Other OtStrFac -19% 4.3 Transfrmatin f liabilities n the Sectin 179 basis n assumptins as at the Input Date t the smthed and stressed Sectin 179 basis as at the Output Date Strip ut any expense allwance frm liability figures fr each class f membership if necessary If S179InputWUExp + S179InputPayExp > 0 r S179InputAssVN=V1 and S179InputTL>S179InputPL+ S179InputDL+ S179InputAL then the input liabilities shuld nt cntain expenses s S179InputPLNExp = S179InputPL Pensin Prtectin Fund 7 December 2017

8 S179InputDLNExp = S179InputDL S179InputALNExp = S179InputAL Otherwise If S179InputAssVN = A7 r A8 Then S179InputPLNPayExp = max(s179inputpl x PMemN, 0) S179InputDLNPayExp = max(s179inputdl - 1,000 x DMemN, 0) S179InputALNPayExp = max(s179inputal - 1,000 x AMemN, 0) If S179InputAssVN = V1, V2, A3, A4, A5 r A6 Then S179InputPLNPayExp = max(s179inputpl x PMemN, 0) S179InputDLNPayExp = max(s179inputdl x DMemN, 0) S179InputALNPayExp = max(s179inputal x AMemN, 0) and fr all S179InputAssVN, S179InputTLNPayExp = S179InputPLNPayExp + S179InputDLNPayExp + S179InputALNPayExp If S179InputAssVN = V1, V2, A3, A4, A5, A6, A7 r A8 S179InputPLNExp = S179InputPLNPayExp / (1 + S179InputExp%) S179InputDLNExp = S179InputDLNPayExp / (1 + S179InputExp%) S179InputALNExp = S179InputALNPayExp / (1 + S179InputExp%) where If S179InputTLNPayExp < 51.5 millin, then (1+ S179InputExp%) = 1.03 If 51.5 millin =< S179InputTLNPayExp < millin, then (1+ S179InputExp%) = (1.02 x S179InputTLNPayExp) / (S179InputTLNPayExp 0.5 millin) If S179InputTLNPayExp >= millin, then (1+ S179InputExp%) = (1.01 x S179InputTLNPayExp) / (S179InputTLNPayExp 1.5 millin) Pensin Prtectin Fund 8 December 2017

9 4.3.2 Divide the liabilities between thse accrued befre April 1997, between April 1997 and April 2009, and after April 2009 (different indexatin and revaluatin) S179InputPLPre97 = S179InputPLNExp x S179InputPPre97Ppn S179InputPLPst97 = S179InputPLNExp x (1 S179InputPPre97Ppn) S179InputDLPre97 = S179InputDLNExp x S179InputDPre97Ppn S179InputDL97_09 = S179InputDLNExp x S179InputD97_09Ppn S179InputDLPst09 = S179InputDLNExp x (1 S179InputDPre97Ppn S179InputD97_09Ppn) S179InputALPre97 = S179InputALNExp x S179InputAPre97Ppn S179InputAL97_09 = S179InputALNExp x S179InputA97_09Ppn S179InputALPst09 = S179InputALNExp x (1 S179InputAPre97Ppn S179InputA97_09Ppn) Details f the assumptins made where S179InputPPre97Ppn, S179InputDPre97Ppn, S179InputD97_09Ppn, S179InputAPre97Ppn r S179InputA97_09Ppn have nt been prvided (r are nt in the frm required by the Bard) are set ut in sectin 5 f this dcument Cnvert frm Sectin 179 assumptins as at S179InputDate t smthed and stressed Sectin 179 assumptins as at OutputDate The financial and demgraphic assumptins as at OutputDate (31 March 2018) shuld be based n Sectin 179 assumptins versin A8. Annuities used fr cnversin General assumptins fr annuity factrs The fllwing sectin specifies the calculatin f mrtality, discunt rates and ther parameters, depending n whether the valuatin at S179InputDate was prepared under assumptins guidance V1, V2, A3, A4, A5, A6, A7 r A8. If the valuatin at S179InputDate was prepared under assumptins guidance ther than V1, V2, A3, A4, A5, A6, A7 r A8 (fr example n future versins f guidance), use assumptins that are cnsistent with the relevant guidance in frce at that date. At S179InputDate where the valuatin was prepared using assumptins guidance versin V1, V2 r A3, Mrtality: PA92 with medium chrt imprvements frm The year f use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate. At S179InputDate where the valuatin was prepared using assumptins guidance versin A4, Mrtality: PCMA00 (fr males) and PCFA00 (fr females), as apprpriate, in each case with medium chrt imprvement rates, and with a 1% flr t the annual imprvements, bth applying frm The year f Pensin Prtectin Fund 9 December 2017

10 use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate. At S179InputDate where the valuatin was prepared using assumptins guidance versin A5, Mrtality: PCMA00 (fr males) and PCFA00 (fr females), as apprpriate, in each case with medium chrt imprvement rates, and with a 1.25% flr (fr males) and a 1% flr (fr females) t the annual imprvements, all applying frm the year The year f use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate. At S179InputDate where the valuatin was prepared using assumptins guidance versin A6, Mrtality: PCMA00 (fr males) and PCFA00 (fr females), as apprpriate, in each case with medium chrt imprvement rates, and with a 1.5% flr (fr males) and a 1% flr (fr females) t the annual imprvements, all applying frm the year The year f use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate. At S179InputDate where the valuatin was prepared using assumptins guidance versin A7, Mrtality: S1PMA (fr males) and S1PFA (fr females), as apprpriate, in each case adjusted t apply a factr f 0.9 t the qxs, with future changes in line with CMI_2012_M [1.50 per cent] (fr males) and CMI_2012_F [1.00 per cent] (fr females), all applying frm the year The year f use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate. At S179InputDate where the valuatin was prepared using assumptins guidance versin A8 and at Output Date, Mrtality: S2PMA (fr males) and S2PFA (fr females), as apprpriate, with future changes in line with CMI_2014_M [1.50 per cent] (fr males) and CMI_2014_F [1.25 per cent] (fr females), all applying frm the year The year f use/retirement t adpt is described in the fllwing table fr annuities at S179InputDate (substitute OutputDate fr S179InputDate t btain year f use/retirement applicable t annuities at OutputDate). Annuity annuityfactrpre97 annuityfactrpst97 Year f Use S179InputDate S179InputDate Deferred Annuity Year f Retirement 3 defannuityfactrpre97def S179InputDate + NPAPre97 DAvAge defannuityfactr97_09def S179InputDate + NPA97_09 DAvAge defannuityfactrpst09def S179InputDate + NPAPst09 DAvAge defannuityfactrpre97act S179InputDate + NPAPre97 AAvAge 3 Mrtality imprvements are assumed t apply in deferment frm S179InputDate (r OutputDate as apprpriate). Fr example, if DAvAge is 53 and the relevant NPA is 63 and S179InputDate/OutputDate is 31 March 2018 (and s the assumed year f retirement is 2028) the deferred annuity will take accunt f mrtality imprvements up t 2028 in deferment, and thereafter take accunt f mrtality imprvements frm 2028 in payment. Pensin Prtectin Fund 10 December 2017

11 defannuityfactr97_09act defannuityfactrpst09act S179InputDate + NPA97_09 AAvAge S179InputDate + NPAPst09 AAvAge Age: PAvAge, DAvAge r AAvAge (as apprpriate) 4 - where DAvAge r AAvAge > NPAPre97, NPA97_09 r NPAPst09 as apprpriate, an immediate annuity is used in place f a deferred annuity Sex: male Spuse s prprtin: 50% Prprtin married: where S179InputAssVN = V1, V2, A3 r A4, 80% where S179InputAssVN = A5, A6, A7 r A8 and at Output Date, 75%. Wife three years yunger than member N allwance fr pre-retirement mrtality Nrmal pensin age: NPAPre97, NPA97_09 r NPAPst09 as apprpriate N guarantee perid fr annuities Discunt rate pre retirement The annuity factrs applicable t nn-pensiners are thse prefixed by def. The pre-retirement discunt rate is derived as fllws: defannuityfactrpre97def, defannuityfactr97_09def, defannuityfactrpre97act, defannuityfactr97_09act: Where S179InputAssVN = V1 r V2, Yield A(i) as at S179InputDate, less 0.5% Where S179InputAssVN = A3, Yield A(i) as at S179InputDate, less 0.7% Where S179InputAssVN = A4, Yield A(i) as at S179InputDate, less 0.4% Where S179InputAssVN = A5, A6 r A7, Yield A(i) as at S179InputDate, less 0.3% Where S179InputAssVN = A8, Yield A(ii) as at S179InputDate At OutputDate, Smthed Yield A(ii) as at OutputDate, plus IntStrFac, less InflnStrFac. Yield A(i) shuld be determined as 50% f the sum f the annualised real yields n the FTSE UK Gilts Index-Linked ver 15 years indices assuming 0% and 5% inflatin. Yield A(ii) shuld be determined as 50% f the sum f the annualised real yields n the FTSE UK Gilts Index-Linked 5 t 15 years indices assuming 0% and 5% inflatin. Smthed Yield A(ii) shuld be determined as the five-year average f the daily values f Yield A(ii) in line with subsectin 4.1 abve. defannuityfactrpst09def, defannuityfactrpst09act: Where S179InputAssVN = V1 r V2, Yield A(i) as at S179InputDate, less 0.5% Where S179InputAssVN = A3, Yield A(i) as at S179InputDate, less 0.7% 4 Details f the assumptins made where average ages have nt been prvided by schemes are set ut in sectin 5 f this dcument. Pensin Prtectin Fund 11 December 2017

12 Where S179InputAssVN = A4, Yield A(i) as at S179InputDate, less 0.4% Where S179InputAssVN = A5 r A6, the maximum f: Yield A(i) as at S179InputDate, less 0.3%: and Yield B(i) as at S179InputDate, less 2.6%. Where S179InputAssVN = A7, the maximum f: Yield A(i) as at S179InputDate, less 0.3%: and Yield B(i) as at S179InputDate, less 2.2%. Where S179InputAssVN = A8, the maximum f: Yield A(ii) as at S179InputDate: and Yield B(ii) as at S179InputDate, less 2.5%. At OutputDate, the maximum f: Smthed Yield A(ii) as at OutputDate, plus IntStrFac less InflnStrFac: and Smthed Yield B(ii) as at OutputDate, less 2.5% plus IntStrFac. Yield B(i) shuld be determined as the annualised yield n the FTSE UK Gilts 20 years Fixed Interest index. Yield B(ii) shuld be determined as the annualised yield n the FTSE UK Gilts 15 years Fixed Interest index. Smthed Yield B(ii) shuld be determined as the five-year average f the daily values f Yield B(ii) in line with subsectin 4.1 abve. Since there is n allwance fr mrtality befre retirement, generally defannuityfactr() = (1 / (1 + i) t ) x annuityfactr(), where t is the perid t retirement (taken as nrmal pensin age less DAvAge r AAvAge as apprpriate) and i is the relevant pre retirement discunt rate. Discunt rate pst retirement The pst-retirement discunt rate shuld be derived as fllws: defannuityfactrpre97def and defannuityfactrpre97act: Where S179InputAssVN = V1 r V2 r A3, Yield C(i) as at S179InputDate Where S179InputAssVN = A4, Yield C(i) as at S179InputDate, plus 0.3% Where S179InputAssVN = A5, Yield C(ii) as at S179InputDate, plus 0.6% Where S179InputAssVN = A6, Yield C(ii) as at S179InputDate, plus 0.4% Where S179InputAssVN = A7, Yield C(ii) as at S179InputDate, less 0.1% Where S179InputAssVN = A8, Yield C(iii) as at S179InputDate, less 0.4% At OutputDate, Smthed Yield C(iii) as at OutputDate, less 0.4%, plus IntStrFac annuityfactrpre97: Where S179InputAssVN = V1 r V2 r A3, Yield C(i) as at S179InputDate Where S179InputAssVN = A4, Yield C(i) as at S179InputDate, plus 0.3% Pensin Prtectin Fund 12 December 2017

13 Where S179InputAssVN = A5, Yield C(ii) as at S179InputDate, plus 0.6% Where S179InputAssVN = A6, Yield C(ii) as at S179InputDate, plus 0.4% Where S179InputAssVN = A7, Yield C(ii) as at S179InputDate, less 0.1% Where S179InputAssVN = A8, Yield C(i) as at S179InputDate, plus 0.3% At OutputDate, Smthed Yield C(i) as at OutputDate, plus 0.3%, plus IntStrFac Yield C(i) shuld be determined as the annualised yield n the FTSE UK Gilts 10 years Fixed Interest index. Yield C(ii) shuld be determined as the annualised yield n the FTSE UK Gilts 15 years Fixed Interest index. Yield C(iii) shuld be determined as the annualised yield n the FTSE UK Gilts 20 years Fixed Interest index. Smthed Yield C(i) shuld be determined as the five-year average f the daily values f Yield C(i) in line with subsectin 4.1 abve. Smthed Yield C(iii) shuld be determined as the five-year average f the daily values f Yield C(iii) in line with subsectin 4.1 abve. defannuityfactr97_09def, defannuityfactrpst09def, defannuityfactr97_09act, defannuityfactrpst09act: Where S179InputAssVN = V1 r V2, Yield D(i) as at S179InputDate, less 0.5% Where S179InputAssVN = A3, the maximum f: Yield D(i) as at S179InputDate, less 0.5%; and Yield C(i) as at S179InputDate, less 2.5%. Where S179InputAssVN = A4, the maximum f: Yield D(i) as at S179InputDate, less 0.2%; and Yield C(i) as at S179InputDate, less 2.2%. Where S179InputAssVN = A5, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 1.9%. Where S179InputAssVN = A6, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 2.1%. Where S179InputAssVN = A7, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 2.2%. Where S179InputAssVN = A8, the maximum f: Yield D(i) as at S179InputDate, plus 0.2%; and Yield C(iii) as at S179InputDate, less 2.6%. At OutputDate, the maximum f: Smthed Yield D(i) as at OutputDate, plus 0.2% plus IntStrFac less InflnStrFac; and Pensin Prtectin Fund 13 December 2017

14 Smthed Yield C(iii) as at OutputDate, less 2.6% plus IntStrFac. annuityfactrpst97: Where S179InputAssVN = V1 r V2, Yield D(i) as at S179InputDate, less 0.5% Where S179InputAssVN = A3, the maximum f: Yield D(i) as at S179InputDate, less 0.5%; and Yield C(i) as at S179InputDate, less 2.5%. Where S179InputAssVN = A4, the maximum f: Yield D(i) as at S179InputDate, less 0.2%; and Yield C(i) as at S179InputDate, less 2.2%. Where S179InputAssVN = A5, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 1.9%. Where S179InputAssVN = A6, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 2.1%. Where S179InputAssVN = A7, the maximum f: Yield D(i) as at S179InputDate, plus 0.1%; and Yield C(ii) as at S179InputDate, less 2.2%. Where S179InputAssVN = A8, the maximum f: Yield D(ii) as at S179InputDate, plus 0.9%; and Yield C(i) as at S179InputDate, less 1.6%. At OutputDate, the maximum f: Smthed Yield D(ii) as at OutputDate, plus 0.9% plus IntStrFac less InflnStrFac; and Smthed Yield C(i) as at OutputDate, less 1.6% plus IntStrFac. Yield D(i) shuld be determined as 50% f the sum f the annualised real yields n the FTSE UK Gilts Index-Linked ver 5 years indices assuming 0% and 5% inflatin. Yield D(ii) shuld be determined as 50% f the sum f the annualised real yields n the FTSE UK Gilts Index-Linked 5 t 15 years indices assuming 0% and 5% inflatin. Smthed Yield D(i) shuld be determined as the five-year average f the daily values f Yield D(i) in line with subsectin 4.1 abve. Smthed Yield D(ii) shuld be determined as the five-year average f the daily values f Yield D(ii) in line with subsectin 4.1 abve. In the frmulae belw, S179rate@OutputDate and S179rate@S179InputDate refer respectively t the smthed and stressed S179 basis applicable at Output Date and the unsmthed, unstressed S179 basis applicable at S179Input Date, determined in accrdance with the subsectins abve. Pensin Prtectin Fund 14 December 2017

15 Pensiner liabilities = S179InputPLPre97 x annuityfactrpre97(s179rate@outputdate) annuityfactrpre97(s179rate@s179inputdate) S179PLPst97@S179InputDate = S179InputPLPst97 x annuityfactrpst97(s179rate@outputdate) annuityfactrpst97(s179rate@s179inputdate) Nn-pensiner liabilities S179DLPre97@S179InputDate = S179InputDLPre97 x defannuityfactrpre97def(s179rate@outputdate) defannuityfactrpre97def(s179rate@s179inputdate) S179DL97_09@S179InputDate = S179InputDL97_09 x defannuityfactr97_09def(s179rate@outputdate) defannuityfactr97_09def(s179rate@s179inputdate) S179DLPst09@S179InputDate = S179InputDLPst09 x defannuityfactrpst09def(s179rate@outputdate) defannuityfactrpst09def(s179rate@s179inputdate) S179ALPre97@S179InputDate = S179InputALPre97 x defannuityfactrpre97act(s179rate@outputdate) defannuityfactrpre97act(s179rate@s179inputdate) S179AL97_09@S179InputDate = S179InputAL97_09 x defannuityfactr97_09act(s179rate@outputdate) defannuityfactr97_09act(s179rate@s179inputdate) S179ALPst09@S179InputDate = S179InputALPst09 x defannuityfactrpst09act(s179rate@outputdate) defannuityfactrpst09act(s179rate@s179inputdate) Pensin Prtectin Fund 15 December 2017

16 4.4 Transfrming the smthed and stressed liabilities and external liabilities frm S179InputDate t OutputDate, and transfrming the assets frm RelAcDate t OutputDate with allwance fr smthing Liabilities S179PLPre97@OutputDate = S179PLPre97@S179InputDate x (1 + i) S179PLPst97@OutputDate = S179PLPst97@S179InputDate x (1 + i) (OutputDate S179InputDate) years (OutputDate S179InputDate) years S179DLPre97@OutputDate = S179DLPre97@S179InputDate x (1 + j) (OutputDate S179InputDate) years S179DL97_09@OutputDate = S179DL97_09@S179InputDate x (1 + j) (OutputDate S179InputDate) years S179DLPst09@OutputDate = S179DLPst09@S179InputDate x (1 + j) (OutputDate S179InputDate) years S179ALPre97@OutputDate = S179ALPre97@S179InputDate x (1 + j) (OutputDate S179InputDate) years S179AL97_09@OutputDate = S179AL97_09@S179InputDate x (1 + j) (OutputDate S179InputDate) years S179ALPst09@OutputDate = S179ALPst09@S179InputDate x (1 + j) (OutputDate S179InputDate) years The time perid OutputDate S179InputDate is measured in years and fractins f years. i = Smthed Yield C(i) as at OutputDate, plus IntStrFac. j = Smthed Yield C(iii) as at OutputDate, plus IntStrFac. S179PL = S179PLPre97@OutputDate + S179PLPst97@OutputDate S179DL = S179DLPre97@OutputDate + S179DL97_09@OutputDate + S179DLPst09@OutputDate Pensin Prtectin Fund 16 December 2017

17 S179AL = S179ALPre97@OutputDate + S179AL97_09@OutputDate + S179ALPst09@OutputDate External liabilities and ABC Arrangements Prir t the 2010/11 Levy Year it was the case that, depending n the surce f the Sectin 179 Valuatin data and the versin f the guidance under which the valuatin was prepared, external liabilities (S179InputExLiab) were either included in the ttal liabilities (S179InputTL) r deducted frm the assets (S179InputAss). In Nvember 2008 Exchange was upgraded t require all Schemes t enter the infrmatin with the external liabilities included in the field S179InputTL and nt t deduct it frm the S179InputAss field. It shuld therefre be the case that the cnditin belw will always be true. The calculatin belw is als designed t exclude any value attributed in the Sectin 179 Valuatin t an ABC Arrangement. If S179InputTL = S179InputPL + S179InputDL + S179InputAL + S179InputWUExp + S179InputPayExp + S179InputExLiab Then S179ExLiab = S179InputExLiab AdjS179InputAss = S179InputAss - s179abcamunt Otherwise S179ExLiab = S179InputExLiab AdjS179InputAss = S179InputAss + S179InputExLiab - s179abcamunt Assets Where G% + NG% + IL% 100% the values will then be adjusted using the apprach set ut in sectin 5 f this dcument. Where UK% + OS% + PE% 100% the values will then be adjusted using the apprach set ut in sectin 5 f this dcument. Where B% + Eq% + Pr% + In% + An% + He% + Ca% + C% + ABC% +Ot% 100% the values will then be adjusted using the apprach set ut in sectin 5 f this dcument. The asset splits will then be adjusted t exclude any prprtin in relatin t an ABC Arrangement. The remaining asset classes will then be scaled up t 100% as fllws. B%Adj = B% / (1 - ABC%) Eq%Adj = Eq% / (1 - ABC%) Pr%Adj = Pr% / (1 - ABC%) In%Adj = In% / (1 - ABC%) An%Adj = An% / (1 - ABC%) He%Adj = He% / (1 - ABC%) Ca%Adj = Ca% / (1 - ABC%) Pensin Prtectin Fund 17 December 2017

18 C%Adj = C% / (1 - ABC%) Ot%Adj = Ot% / (1 - ABC%) Since the value f assets used in the Sectin 179 Valuatin may have been adjusted t include the value f assets held in the frm f insurance cntracts nt included in Scheme accunts, the allcatin between the different asset classes may need t be adjusted t take accunt f this adjustment. This is allwed fr, where apprpriate, by multiplying each asset class (excluding any value attributed t an ABC Arrangement using the scaling up calculatin abve) thrugh by (100% - S179InputInsPpnAdj) and then adding S179InputInsPpnAdj t the resulting prprtin fr the Annuities class. Fr scheme accunting years cmmencing n r after 1 January 2015, the cntracts underlying S179InputInsPpn will be included in the accunts and will therefre als be in the asset breakdwn at AssetDate (typically within An%). In these cases, if the accunts underlying the Sectin 179 Valuatin relate t a scheme accunting year cmmencing befre 1 January 2015, then the adjustments described in the abve paragraph are nt apprpriate due t the ptential fr incnsistent treatment f annuity cntracts between the asset value in the Sectin 179 Valuatin and the asset breakdwn at AssetDate. This ptential fr incnsistent treatment is addressed by setting S179InputInsPpnAdj t zer when the accunting perid crrespnding t AssetDate cmmenced n r after 1 January 2015 and RelAcDate is befre 31 December If AssetDate is n r after 31 December 2015 and RelAcDate is befre 31 December 2015 and the Bard has nt received evidence that the accunting perid crrespnding t AssetDate cmmenced befre 1 January 2015: S179InputInsPpnAdj = 0 Else S179InputInsPpnAdj = S179InputInsPpn * S179InputAss / (S179InputAss - s179abcamunt) Then rll frward t the Output Date, reflecting smthed returns likely t be earned r t have been earned n schemes actual assets using, as far as pssible, published infrmatin abut returns n assets in different classes. First wrk ut the asset values at RelAcDate fr each asset class. If AssetDate = RelAcDate, G@RelAcDate = AdjS179InputAss x B%Adj x G% x (100% - S179InputInsPpnAdj) NG@RelAcDate = AdjS179InputAss x B%Adj x NG% x (100% - S179InputInsPpnAdj) IL@RelAcDate = AdjS179InputAss x B%Adj x IL% x (100% - S179InputInsPpnAdj) UK@RelAcDate = AdjS179InputAss x Eq%Adj x UK% x (100% - S179InputInsPpnAdj) OS@RelAcDate = AdjS179InputAss x Eq%Adj x OS% x (100% - S179InputInsPpnAdj) PE@RelAcDate = AdjS179InputAss x Eq%Adj x PE% x (100% - S179InputInsPpnAdj) Prp@RelAcDate = AdjS179InputAss x Pr%Adj x (100% - Pensin Prtectin Fund 18 December 2017

19 S179InputInsPpnAdj) = AdjS179InputAss x In%Adj Annuities@RelAcDate = AdjS179InputAss x (100% - S179InputInsPpnAdj) x (An%Adj x (100% - S179InputInsPpnAdj) + S179InputInsPpnAdj) Hedge@RelAcDate = AdjS179InputAss x He%Adj x (100% - S179InputInsPpnAdj) Cash@RelAcDate = AdjS179InputAss x Ca%Adj x (100% - S179InputInsPpnAdj) Cmmdities@RelAcDate = AdjS179InputAss x C%Adj Other@RelAcDate = AdjS179InputAss x Ot%Adj x (100% - S179InputInsPpnAdj) x (100% - S179InputInsPpnAdj) Then rll frward the asset values t OutputDate with allwance fr smthing, G@OutputDate = G@RelAcDate x BRet(RelAcDate, OutputDate) NG@OutputDate = NG@RelAcDate x BRet(RelAcDate, OutputDate) IL@OutputDate = IL@RelAcDate x BRet(RelAcDate, OutputDate) UK@OutputDate = UK@RelAcDate x UKRet(RelAcDate, OutputDate) OS@OutputDate = OS@RelAcDate x OSRet(RelAcDate, OutputDate) PE@OutputDate = PE@RelAcDate x UKRet(RelAcDate, OutputDate) Prp@OutputDate = Prp@RelAcDate x PrRet(RelAcDate, OutputDate) Annuities@OutputDate = Annuities@RelAcDate x BRet(RelAcDate, OutputDate) Hedge@OutputDate Pensin Prtectin Fund 19 December 2017

20 = x HeRet(RelAcDate, OutputDate) = x CaRet(RelAcDate, OutputDate) = x (50% x BRet(RelAcDate, OutputDate) % x UKRet(RelAcDate, OutputDate) % x OSRet(RelAcDate, OutputDate) + 25% x CaRet(RelAcDate, OutputDate) ) Cmmdities@OutputDate = Cmmdities@RelAcDate x (50% x BRet(RelAcDate, OutputDate) % x UKRet(RelAcDate, OutputDate) % x OSRet(RelAcDate, OutputDate) + 25% x CaRet(RelAcDate, OutputDate) ) Other@OutputDate = Other@RelAcDate x (50% x BRet(RelAcDate, OutputDate) % x UKRet(RelAcDate, OutputDate) % x OSRet(RelAcDate, OutputDate) + 25% x CaRet(RelAcDate, OutputDate) ) The asset return rll up factrs are defined as fllws: Asset categry (Xx) B UK Asset return rll up factr XxRet(Date1, Date2) FTSE UK Gilts All stcks TRI@Date2 FTSE UK Gilts All stcks TRI@Date1 FTSE All-Share TRI@Date2 FTSE All-Share TRI@Date1 OS FTSE All-Wrld ex UK TRI@Date2 5 FTSE All-Wrld ex UK TRI@Date1 Pr When Date2 is nt specified as the OutputDate f 31 March 2018, PrRet(Date1, Date2) is defined as fllws: 5 FTSE All-Wrld ex UK TRI (Sterling denminated) t be used Pensin Prtectin Fund 20 December 2017

21 FTSE All-Share FTSE All-Share (FTSE All-Share FTSE All-Share June 2006) x (FTSE All UK Prperty Grss TRI@22 June 2006 FTSE All UK Prperty Grss TRI@Date1) (FTSE All-Share TRI@Date2 FTSE All-Share TRI@22 June 2006) x (FTSE All UK Prperty Grss TRI@22 June 2006 FTSE All UK Prperty Grss TRI@31 December 2014) x (IPD UK Mnthly Prperty TRI@31 December 2014 IPD UK Mnthly Prperty TRI@Date1) (FTSE All-Share TRI@22 June 2006 FTSE All-Share TRI@Date1) x (FTSE All UK Prperty Grss TRI@Date2 FTSE All UK Prperty Grss TRI@22 June 2006) FTSE All UK Prperty Grss TRI@Date2 FTSE All UK Prperty Grss TRI@Date1 If Date1 and Date2 are bth n r befre 22 June 2006 If Date1 is after 22 June 2006 and n r befre 31 December 2014 and Date2 is n r befre 22 June 2006 If Date1 is after 31 December 2014 and Date2 is n r befre 22 June 2006 If Date1 is n r befre 22 June 2006 and Date2 is after 22 June 2006 and n r befre 31 December 2014 If Date1 and Date2 are bth after 22 June 2006 and n r befre 31 December 2014 (FTSE All UK Prperty Grss TRI@Date2 FTSE All UK Prperty Grss TRI@31 December 2014) x (IPD UK Mnthly Prperty TRI@31 December 2014 IPD UK Mnthly Prperty TRI@Date1) (FTSE All-Share TRI@22 June 2006 FTSE All-Share TRI@Date1) x (FTSE All UK Prperty Grss TRI@31 December 2014 FTSE All UK Prperty Grss TRI@22 June 2006) x (IPD UK Mnthly Prperty TRI@Date2 If Date1 is after 31 December 2014 and Date2 is after 22 June 2006 and n r befre 31 December 2014 If Date1 is n r befre 22 June 2006 and Date2 is after 31 December 2014 Pensin Prtectin Fund 21 December 2017

22 IPD UK Mnthly Prperty December 2014) (FTSE All UK Prperty Grss December 2014 FTSE All UK Prperty Grss x (IPD UK Mnthly Prperty IPD UK Mnthly Prperty December 2014) If Date1 is after 22 June 2006 and n r befre 31 December 2014 and Date2 is after 31 December 2014 IPD UK Mnthly Prperty TRI@Date2 IPD UK Mnthly Prperty TRI@Date1 If Date1 and Date2 are bth after 31 December 2014 When Date2 is specified as the OutputDate f 31 March 2018, PrRet(Date1, OutputDate) is defined as fllws: The index value at Date2, the OutputDate, is smthed by cnstructing the fllwing five year series: FTSE All UK Prperty Grss TRI@DateX FTSE All UK Prperty Grss TRI@31 December 2014 x (IPD UK Mnthly Prperty TRI@DateX IPD UK Mnthly Prperty TRI@31 December 2014) Where DateX is n r after 1 April 2013 and n r befre 31 December 2014 Where DateX is n r after 1 January 2015 and n r befre 31 March 2018 This series is then smthed in line with subsectin 4.1 abve and divided by the denminatr derived frm the table belw t give the prperty return rll up factr PrRet(Date1, OutputDate): (FTSE All-Share TRI@Date1 FTSE All-Share TRI@22 June 2006) x FTSE All UK Prperty Grss TRI@22 June 2006 FTSE All UK Prperty Grss TRI@Date1 (IPD UK Mnthly Prperty TRI@Date1 IPD UK Mnthly Prperty TRI@31 December 2014) x FTSE All UK Prperty Grss TRI@31 December 2014 If Date1 is n r befre 22 June 2006 If Date1 is after 22 June 2006 and n r befre 31 December 2014 If Date1 is after 31 December 2014 Pensin Prtectin Fund 22 December 2017

23 Where reference is made t the IPD UK Mnthly Prperty TRI: the IPD UK Mnthly Prperty All Prperty TRI shuld be used fr dates between 31 December 2014 and 29 June 2016 inclusive. the IPD UK Mnthly Prperty All Assets TRI shuld be used fr dates n r after 30 June He FTSE All-Share TRI@Date2 FTSE All-Share TRI@Date1 (FTSE All-Share TRI@Date2 FTSE All-Share TRI@1 June 2005) x (HFRX Glbal Hedge Fund GBP Index TRI@1 June 2005 HFRX Glbal Hedge Fund GBP Index TRI@Date1) (FTSE All-Share TRI@1 June 2005 FTSE All-Share TRI@Date1) x (HFRX Glbal Hedge Fund GBP Index TRI@Date2 HFRX Glbal Hedge Fund GBP Index TRI@1 June 2005) HFRX Glbal Hedge Fund GBP Index TRI@Date2 HFRX Glbal Hedge Fund GBP Index TRI@Date1 If Date1 and Date2 are bth n r befre 1 June 2005 If Date1 is after 1 June 2005 and Date2 is n r befre 1 June 2005 If Date1 is n r befre 1 June 2005 and Date2 is after 1 June 2005 If Date1 and Date2 are bth after 1 June 2005 Ca Cash TRI@Date2 Cash TRI@Date1 where Cash TRI@DateX = 1 + Cashreturn%(BaseDate, DateX), Cashreturn% estimated by rlling up the Bank f England base rate frm BaseDate t DateX, and BaseDate = 1 Nvember 2004 When Date2 is specified as the OutputDate f 31 March 2018, the index values at Date2 are smthed in line with subsectin 4.1 abve unless therwise stated; therwise, unsmthed index values are used. If AssetDate is earlier than RelAcDate Derive the asset distributin fr assets included in the accunts at RelAcDate based n the given asset distributin at AssetDate excluding any ABC Arrangement, allwing fr differential asset returns fr each asset categry ver the perid frm AssetDate t RelAcDate. This is dne using rll frward frmulae cnsistent with thse abve. The asset distributin at RelAcDate fr assets included in the accunts is then calculated by nrmalising the ttal t 100%. The adjustment fr the field S179InputInsPpnAdj, t take accunt f annuities nt listed in the relevant accunts, is made after the nrmalisatin Pensin Prtectin Fund 23 December 2017

24 prcess. These nrmalised allcatin percentages are then used in the frmulae abve t calculate the asset value at OutputDate. If AssetDate is later than RelAcDate, Derive the asset distributin fr assets included in the accunts at RelAcDate based n the given asset distributin at AssetDate excluding any ABC Arrangement, allwing fr differential asset returns fr each asset categry ver the perid frm RelAcDate t AssetDate. In effect the rll-frward frmulae abve are used in reverse fr the perid frm AssetDate back t RelAcDate and applied t the prprtins f assets in each class as at AssetDate. The asset distributin at RelAcDate fr assets included in the accunts is then calculated by nrmalising the ttal t 100%. The adjustment fr the field S179InputInsPpnAdj, t take accunt f annuities nt listed in the relevant accunts, is made after the nrmalisatin prcess. These nrmalised allcatin percentages are then used in the frmulae abve t calculate the asset value at OutputDate. 4.5 Applicatin f Sectin 179 expenses S179PayExp = 700 x PMemN + 1,000 x (DMemN + AMemN) If S179PL + S179DL + S179AL < 50 millin, then S179WUExp = (S179PL + S179DL + S179AL) x 0.03 If 50millin =< S179PL + S179DL + S179AL < 100 millin, then S179WUExp = (S179PL + S179DL + S179AL) x millin If S179PL + S179DL + S179AL >= 100 millin, then S179WUExp = (S179PL + S179DL + S179AL) x millin S179Exp = S179PayExp + S179WUExp 4.6 Ttal liability value n smthed and stressed Sectin 179 basis S179TL = S179PL + S179DL + S179AL + S179Exp + S179ExLiab 4.7 Ttal asset value n smthed and stressed basis In standard cases, where n bespke stress analysis has been submitted: S179Ass = G@OutputDate x (1 + GStrFac) + NG@OutputDate x (1 + NGStrFac) + IL@OutputDate x (1 + ILStrFac) + UK@OutputDate x (1 + UKStrFac) + OS@OutputDate x (1 + OSStrFac) + PE@OutputDate x (1 + PEStrFac) + Prp@OutputDate x (1 + PrStrFac) + Insurance@OutputDate x (1 + InStrFac) + Annuities@OutputDate x (1 + AnStrFac) + Hedge@OutputDate x (1 + HeStrFac) + Cash@OutputDate x (1 + CaStrFac) + Cmmdities@OutputDate x (1 + CStrFac) + Other@OutputDate x (1 + OtStrFac) Pensin Prtectin Fund 24 December 2017

25 In cases where a bespke stress analysis has been submitted: Adjust BespkeUnstr and BespkeStr t make allwance fr assets held in the frm f insurance cntracts nt included in Scheme accunts Use the rati f these adjusted asset values t apply a bespke stress factr BespkeUnstrAdj = BespkeUnstr (100% - S179InputInsPpnAdj) BespkeStrAdj = BespkeStr + BespkeUnstrAdj x S179InputInsPpnAdj x (1 + AnStrFac) S179Ass = (G@OutputDate + NG@OutputDate + IL@OutputDate + UK@OutputDate + OS@OutputDate + PE@OutputDate + Prp@OutputDate + Insurance@OutputDate + Annuities@OutputDate + Hedge@OutputDate + Cash@OutputDate + Cmmdities@OutputDate + Other@OutputDate) x BespkeStrAdj BespkeUnstrAdj 4.8 Calculatin f smthed but unstressed asset and liability values The calculatin f the smthed but unstressed asset and liability values fllws the same transfrmatin steps as set ut abve in subsectins 4.1 t 4.7, with the applicatin f the stress factrs mitted (i.e. BespkeStrAdj BespkeUnstrAdj = 1, if applicable, and the stress factrs specified in subsectin 4.2 shuld be treated as if they were zer). In this scenari, the utputs S179Ass and S179TL wuld respectively represent the smthed but unstressed asset and liability values. Pensin Prtectin Fund 25 December 2017

26 5. Assumptins made where input infrmatin has nt been prvided in full (r nt prvided in the frmat required by the Bard) Exchange was upgraded in Nvember 2008 t require Schemes t enter their Sectin 179 Valuatin infrmatin cnsistently with respect t external liabilities (i.e. include the external liabilities in the ttal liabilities and nt reduce the assets). At the same time varius data validatin rules were tightened. It is therefre expected that the fllwing assumptins will nt be necessary fr schemes whse data has been submitted thrugh Exchange after that date. Hwever, they need t be retained in this dcument in case data needs t be used where the Scheme Return had nt been cmpleted (and thus the data validatin rules nt applied). 5.1 If ttal value f prtected liabilities (S179InputTL) is prvided, but S179InputPL, S179InputDL and S179InputAL are missing: Liabilities fr pensins in payment, pssibly including expenses Liabilities fr deferred members, pssibly including expenses Liabilities fr active members, pssibly including expenses S179InputPL S179InputDL S179InputAL = 0.44 x S179InputTL = 0.24 x S179InputTL = 0.29 x S179InputTL Where S179InputTL<>S179InputPL + S179InputDL + S179InputAL + S179InputWUExp + S179InputPayExp + S179InputExLiab then the PPF will adjust the input values in the way it cnsiders mst apprpriate s that the ttal figure equals the sum f the relevant parts. 5.2 If the prprtins f liabilities relating t service befre 6 April 1997 and t service between 6 April 1997 and 5 April 2009 are nt prvided (r nt prvided in the frmat required by the PPF) the fllwing will be assumed: Prprtin f pensiner liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f deferred pensiner liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f deferred pensiner liabilities, excluding expenses, relating t service between 6 April 1997 and 5 April 2009 Prprtin f active member liabilities, excluding expenses, relating t service befre 6 April 1997 Prprtin f active member liabilities, excluding expenses, relating t service between 6 April 1997 and 5 April 2009 S179InputPPre97Ppn = 0.9 S179InputDPre97Ppn = 0.8 S179InputD97_09Ppn = 0.2 S179InputAPre97Ppn = 0.6 S179InputA97_09Ppn = Where the ttal f the percentages f the assets in each asset class (B% + Eq% + Pr% + In% + An% + He% + Ca% + C% + ABC% + Ot%) is less than 100% (r n breakdwn is prvided), Ca% will be increased t give a ttal f 100%. Where the ttal f the percentages f the assets in each class is greater than 100%, the percentages will be pr-rated s as t give an adjusted ttal equal t 100%. Pensin Prtectin Fund 26 December 2017

27 5.4 Where the ttal f the percentages f the bnds in each subcategry (G% + NG% + IL%) is zer (r n breakdwn is prvided), G% will be increased t give a ttal f 100%. Where the ttal f the percentages f the bnds in each subcategry is less than 100% r greater than 100%, the percentages will be pr-rated s as t give an adjusted ttal equal t 100%. 5.5 Where the ttal f the percentages f the equities in each subcategry (UK% + OS% + PE%) is zer (r n breakdwn is prvided), UK% will be increased t give a ttal f 100%. Where the ttal f the percentages f the equities in each subcategry is less than 100% r greater than 100%, the percentages will be pr-rated s as t give an adjusted ttal equal t 100%. 5.6 If PMemN + DMemN + AMemN = 0 but ttal membership number, TtMemN, can be determined frm anther surce then Pensiner members PMemN = 0.45 x TtMemN Deferred members DMemN = 0.25 x TtMemN Active members AMemN = 0.30 x TtMemN 5.7 Where average ages f different classes f members are nt prvided (r are nt prvided in the frmat required by the PPF) the fllwing will be assumed Pensiner members PAvAge 66 Deferred members DAvAge 46 Active members AAvAge Nte als that where average ages have been prvided, if they fall utside f particular ranges, they will be subject t the fllwing adjustments Pensiner members PAvAge PAvAge>120 reduced t 66, PAvAge<25 increased t 25 Deferred members DAvAge DAvAge>75 reduced t 46, DAvAge < 25 increased t 25 Active members AAvAge AAvAge>75 reduced t 46, AAvAge <25 increased t Where the number f the assumptins guidance has nt been prvided, guidance number V2 will be assumed Where the date f relevant accunts is nt prvided, it will be assumed t be equal t the effective date f the Sectin 179 Valuatin Where NPAPre97, NPA97_09 r NPAPst09 have nt been prvided, 63 will be used Where S179InputInsPpn has nt been prvided, 0 will be assumed. Pensin Prtectin Fund 27 December 2017