The Minimum Funding Requirement (MFR) was a part of

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...

legislation Legislation is the process or result of enrolled bill, enrolling, enactment of a bill, enacting, or promulgation, promulgating laws by a legislature, parliament, or analogous Government, governing body. Before an item of legislation becomes law i ...

in the

Pensions Act 1995 The Pensions Act 1995c 26 is a piece of United Kingdom legislation to improve the running of pension schemes. Background Following the death of Robert Maxwell, it became clear that he had embezzled a large amount of money from the pension fund o ...

, and was introduced on 6 April 1997. The

Pensions Act 2004 The Pensions Act 2004 (c 35) is an Act of the Parliament of the United Kingdom to improve the running of pension schemes. Background In the years following the introduction of the Pensions Act 1995, it was widely perceived that it was failing t ...

abolishes the MFR replaces it with new "statutory funding objective"; this came into force on 30 December 2005 for all pension schemes with a valuation date after September 22, 2005. The aim of the Minimum Funding Requirement was to set a minimum amount of assets that a defined benefit

pension scheme A pension (, from Latin ''pensiō'', "payment") is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments ...

should hold in order to fund its promised benefits. If a scheme did not hold sufficient assets, the pension scheme was required to achieve the minimum level within a given time scale. For a scheme with less than 90% of the assets required, the scheme had to pay the shortfall below 90% within three years. Where the scheme was between 90% and 100%, the period was ten years. Although legislation set out the broad requirements of the Minimum Funding Requirement, the details of the methods and assumptions to use were specified in Guidance Note 27, issued by the

Institute of Actuaries The Institute of Actuaries was one of the two professional bodies which represented actuaries in the United Kingdom. The institute was based in England, while the other body, the Faculty of Actuaries, was based in Scotland. While the Institute and ...

and the

Faculty of Actuaries The Faculty of Actuaries in Scotland was the professional body representing actuaries in Scotland. The Faculty of Actuaries was one of two actuarial bodies in the UK, the other was the Institute of Actuaries, which was a separate body in England, ...

. After the introduction of the Minimum Funding Requirement, there were several modifications to the assumptions to cope with perceived weaknesses in the original basis. However, the level of assets required by the MFR never proved sufficient to provide the benefits promised by the scheme which the MFR was supposed to fund. The

abolished the MFR and introduced a new scheme funding objective hoped to adapt more flexibly to individual schemes' circumstances but at the same time protecting members' benefits.

Paul Myners Paul Myners, Baron Myners, (1 April 1948 – 16 January 2022) was a British businessman and politician. In October 2008 he was elevated to the House of Lords as a life peer and was appointed City Minister in the Labour Government of Gordon Br ...

report states on page 4: "I propose replacing the Minimum Funding Requirement, which distorts investment and fails to protect scheme members, with a long-term approach based on disclosure and openness instead of an artificial uniform yardstick."

External links

Actuarial Guidance Note 27
(pdf) *Full text of the Myners Report
''Institutional Investment in the United Kingdom: A Review''
(2001) Pensions in the United Kingdom Retirement