Recent developments which affect the financing of occupational pension schemes in the U.K. arc reviewed. These point to the need for realistic bases, and an approach to finding a ‘best estimate’ is described. It is suggested that typical bases contain significant margins and the long-term dangers of using bases which contain margins are illustrated using a model fund. A review of funding methods suggests that the projected unit and entry age methods should be used for normal purposes in conjunction with a discounted income approach to the valuation of assets. Suggestions are made as to the degree of prudence appropriate for funding purposes.
