Explanatory note

These Regulations come into force on 4th January 1988 and will operate, unless previously revoked, until 6th April 1988, when they will be superseded by the State Scheme Premiums (Actuarial Tables) Regulations 1987. They prescribe the tables in accordance with which the Secretary of State is required to make calculations in relation to personal pension protected rights premiums.

In accordance with section 16 of the Social Security Act 1986, the Regulations prescribe tables which are to be applied according to the current yield on investments, determined by reference to the appropriate “market level indicator”. These indicators are derived from the market price of Stock Exchange securities and are constructed in such a way that the value of the indicator is 100 when the average yield on Government securities of certain coupons and terms to redemption is 9% per annum (convertible annually) and, where relevant, the average dividend yield on equities is 4% per annum.

The market level indicators are averaged over the first 5 days on which the London Stock Exchange is open during the month in which the liability for the payment of a premium arises.

For cases where the person in respect of whom the premium falls to be paid is already a pensioner, the market level indicator is derived from the 15-year gross redemption yield (that is, the gross redemption yield applicable to 15-year British Government Stocks with high coupons compiled by the Financial Times, the Institute of Actuaries and the Faculty of Actuaries) by means of the table in Schedule 4.

For other cases, the market level indicator is made up of two components, based on the yields on equities and fixed interest securities respectively, weighted in the ratio 65:35. The equity component of the indicator is taken as 65 times the ratio of 4% to the gross dividend yield (that is, the gross dividend yield applicable to the All-Share Index compiled by the Financial Times, the Institute of Actuaries and the Faculty of Actuaries) on the day in question. The fixed interest component of the indicator is derived from the 25-year gross redemption yield (that is, the gross redemption yield applicable to 25-year British Government Stocks with high coupons compiled by the Financial Times, the Institute of Actuaries and the Faculty of Actuaries) by means of the table in Schedule 5, which also applies the weighting factor of 35.