UK defined benefit (DB) scheme actuaries do not always articulate the sponsor’s objectives and how they relate to funding advice, research from the Institute and Faculty of Actuaries (IFoA) has revealed.

The finding was included in IFoA’s thematic review on corporate pensions, which found that while the wide range of actuarial work reviewed was of good quality, there were examples where advice could be improved.

In particular, the report found that actuaries do not always articulate the sponsor’s objectives in their advice on funding. This was especially associated with advice that simply sets out reasons to challenge a range of assumptions being put forward by the scheme actuary to the trustees to reduce the sponsor’s contribution requirements.

In addition to this, it found that actuaries do not always fully explain risks and uncertainties, particularly where the advice is recommending that sponsors agree a less prudent funding approach to that put forward by the scheme actuary.

The review also suggested that actuaries are not always clear about the source of liability information quoted or the assumptions used, revealing that in some cases, the information will have been taken directly from reports provided by the scheme actuary to the trustees, while in others, it will have been derived by the corporate actuary.

Taking responsibility for advice was another key theme, as the research found that, in a quarter of submissions reviewed, the actuary preparing the advice was not specifically named, instead taking responsibility for their work in other ways.

This is despite the requirement in the Actuaries’ Code stating that members show clearly that they ‘take responsibility for their work when communicating with users’ suggesting that simply naming the advisor would be a clear approach.

Commenting on the review, IFoA senior review actuary, David Gordon, stated: “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 practice to help inform their work. I would like to thank those actuaries from 15 organisations who agreed to take part in this review.”

Adding to this, IFoA regulatory board lay chair, Nick Buckley, stated: “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.”

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