APT·FUNDING · Module 4: Funding, Benefits and Member Protection·UnitFUNDING · Unit 03Access: Premium
Unit 4.3: Statutory Funding Objective and Statement of Funding Principles
Unit 4.3 covers the statutory funding regime for defined benefit schemes. It sets out the statutory funding objective and the technical provisions behind it, who is responsible for preparing a statement of funding principles, what that statement has to contain, and when and why it has to be reviewed. The structure mirrors Unit 3.5 on the Statement of Investment Principles, and the two documents are worth learning side by side, because they are easy to confuse and the syllabus asks for the contents of each.
What’s in it.
4 topics- Topic 01
A Statutory Funding Objective
41 questions - Topic 02
Responsibilities for Preparing a Statement of Funding Principles
38 questions - Topic 03
The Contents of a Statement of Funding Principles
42 questions - Topic 04
The Need for Reviewing the Statement of Funding Principles
42 questions
Sample questions
3 of manyA few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.
A trustee reviewing a draft SFP is asked to identify which item is a genuine demographic assumption, as distinct from an administrative detail. Which is it?
- The trustees' expenses policy
- The scheme's chosen payroll provider
- The scheme's registered office address
- The withdrawal (leaving service) rateCorrect answer
ExplanationThe withdrawal rate assumption, projecting how many active members leave service before retirement, is a genuine demographic input to technical provisions; the other items are administrative or governance matters, not SFP content. Key takeaway: withdrawal rate is a demographic assumption; the rest are administrative details.
The scheme rules give the sponsoring employer no power over the assumptions used for technical provisions. What is the trustees' obligation toward the employer before finalising those assumptions?
- To consult the employer, without needing to obtain their agreementCorrect answer
- To notify The Pensions Regulator instead of engaging the employer
- To exclude the employer from the process entirely
- To defer the decision until the employer's rule-based power is created
ExplanationAbsent a rule-based power, consultation is the statutory standard, giving the employer a voice without a veto, consistent with Pensions Act 2004, Part 3. Key takeaway: consultation applies by default when the scheme rules give the employer no relevant power.
What is the Scheme Actuary's role in relation to the Statement of Funding Principles, beyond providing advice?
- Approving the finished SFP
- None beyond advising the trusteesCorrect answer
- Agreeing the SFP on the employer's behalf
- Formally signing the SFP
ExplanationThe Scheme Actuary's statutory function is advisory; preparing, deciding and signing the SFP are trustee responsibilities, not the actuary's. The SFP is a trustee-held record that is not routinely filed with TPR; it is the separate statement of strategy that trustees submit to TPR. Key takeaway: advice is the full extent of the actuary's formal role.