What reductions can be made to the initial cash equivalent?
An initial cash equivalent may be reduced to reflect underfunding in a scheme (Regulation 7D and Schedule 1A). This is done on the basis of an “insufficiency report” prepared by an actuary. In essence this remains broadly similar to the “GN11 report”. Indeed, the trustees may treat the actuary’s last GN11 as an insufficiency report provided it meets the requirements set out in Schedule 1B to the Regulations. The initial cash equivalent may also be reduced to reflect any reasonable administrative costs incurred by the scheme, although this must be offset against administrative savings attributable to the member leaving the scheme.
