Update to ASP Pen-4, Funding Proposals under the Pensions Act (effective from 1st April 2010)

The Minister for Social and Family Affairs has approved certain changes to the actuarial assumptions set out in Appendix 1 of ASP Pen-4, Funding Proposals under the Pensions Act.  These changes will come into effect at 1st April 2010.

The main changes are as follows:

• An update of the ASP to include asset classes such as corporate bonds and LDI products, which were not previously explicitly covered;
• A review of the approach to setting the price inflation assumption for liability projection purposes.  We have removed the requirement that price inflation should, as a minimum, reflect the rate of inflation implied by the respective yields on conventional and index-linked bonds as at the date of the Funding Proposal.  In practice, due to the absence of a sufficient volume of Irish bonds of appropriate durations, it has been necessary to base this assessment on other Eurozone bonds.  Due to the current significant divergence in rates of price inflation between Ireland and other Eurozone countries, this approach leads to the adoption of assumptions for Irish inflation which may currently be too high in the context of the projection periods.
• We have reviewed the approach to setting the salary increase assumption for liability projection purposes to allow the actuary to reflect employer's expectations and any pay reductions, where he or she considers it appropriate to do so. 

Click here  to read the updated ASP, which has been posted to the Standards & Regulation section of the website.  A version with changes highlighted is attached below.