Actuaries advising UK-defined benefit pension schemes at times fail to adequately express the sponsor’s objectives in financing advice, according to the Institute and Faculty of Actuaries (IFoA).
The thematic assessment on corporate pensions by the IFoA found that the vast range of actuarial work was of high quality, but it also pointed out that the risks and uncertainties associated with financing advice were not adequately explained, which is crucial when suggesting a less cautious funding strategy.
In addition, a quarter of the submissions that were examined omitted the name of the actuary who prepared the advice, even if they acknowledged their own responsibility for the work in other ways. This raised questions about accountability and the Actuaries’ Code.
Actuaries should give sponsors of UK-defined benefit pension schemes better guidance, according to the IFoA. The review offers suggestions for actuaries on how to enhance their advice and modify it to the shifting UK DB pensions market and highlights a number of areas that require improvement, such as clearly stating the sponsor’s financial goals, outlining risks and uncertainties, accepting responsibility for advice, and presenting data and assumptions.
IFoA senior review actuary David Gordon says: “This has been a complex review across a wide range of advice both in terms of subject matter and style and we found actuaries followed the principles of actuarial standards in their work.
“This report allows us to support IFoA members by identifying specific areas where improved processes could be considered and point to examples of best practices to help inform their work. I would like to thank those actuaries from 15 organisations who agreed to take part in this review.”
IFoA Regulatory Board chair Neil Buckley says: “We are pleased this review has shown that the work and advice scrutinised was, in general, of good quality. Our monitoring scheme is designed to provide useful insight into the work of members and to promote high-quality actuarial work in the public interest.
“We will review the report’s conclusions and consider whether to make any changes to IFoA standards and guidance. We will also discuss the report with fellow regulators and other stakeholders as to whether any action outside the IFoA’s remit is warranted.”