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The Actuary The magazine of the Institute & Faculty of Actuaries
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Professional Affairs Board update

Expert witnesses wanted

he Professional Standards Committee is interested to hear from members who have acted as expert witnesses. The committee is considering a redraft of GN24: The actuary as an expert witness and it would be useful to ascertain how many members have acted as expert witnesses, the frequency of acting, and in what areas they have provided advice.

So, if you have acted in this capacity, please contact Sarah Gander, secretary to the Professional Standards Committee, tel 0131-240 1320, email sarahg@actuaries.org.uk.

Independent pensions experts

From time to time, the Professional Affairs Board is asked to find independent pensions experts when a nomination clause in a contract requires the Faculty or Institute president to nominate an actuary to resolve disputes. This arises, for example, in the sale of a business where the parties are unable to agree the basis for valuing transferring pension rights. The board would like to invite applications from members wishing to be considered for this role. The board plans to keep a list from which nominations will be chosen in rotation by the presidents, subject to individuals on the list meeting the specific requirements of the contract and not being conflicted for an actual case. The board would expect to revisit the list periodically.

The criteria for independent pensions experts are usually ten years or more experience in the pensions field. Experience in merger and acquisition work should be highlighted. The actuary would not need to hold a scheme actuary certificate.

There is no application form and applications should be sent, together with a CV that states relevant experience, to Michael J Scott, secretary to the Professional Affairs Board, at Maclaurin House, tel: 0131-240 1307, email michaels@actuaries.org.uk.

Professional Guidance Committee – case study reports

The Professional Guidance Committee (PGC) wishes to draw the attention of all members to the following situations which it has considered in recent months. Please consider the possible implications for your professional activities, ie outside the specific circumstances of each case.

Case study 1

Members of the profession are frequently transferred from one employing organisation to another under the Transfer of Undertakings Protection of Employees Regulations (TUPE). For example where a company takes over the administration of pension funds on behalf of insurance companies, members employed by the insurance company may become direct employees of the administration company.

In such circumstances it is important for members to comply with paragraph 3.6 of the Professional Conduct Standards which states that:

‘Where a member provides reserved advice, the member must ensure that the client is aware of:

  • The name and qualification of the member providing the advice.
  • The name of the member’s firm.
  • The scope, purpose and terms of reference of the advice provided by the member.’

While the insurance company may wish this arrangement to be ‘invisible’, so that all communications with the client are carried out in the name of the insurance company, there is a professional responsibility on members to comply with the PCS requirement. Members must ensure that their employer is named as the pensions administrator.

Case study 2

A scheme actuary was instructed by the independent trustee to calculate benefits on a basis that the actuary considered neither to be in accordance with his/her interpretation of the scheme‘s documentation nor in line with members’ expectations. When the actuary queried the proposed basis, the independent trustee sought legal advice and reaffirmed his/her earlier instruction.

The scheme actuary then calculated the benefits on the basis requested on the grounds that:

  • the independent trustee appeared to have gone through a proper process;
  • legal advice supported the decision;
  • it was not in the interests of members to further delay the calculation of benefits; and
  • delays might increase costs and further deplete funds.
  • The scheme actuary then considered reporting the circumstances to OPRA but, for the reasons stated above, decided this would not be appropriate. The PGC was comfortable with this decision but wishes to remind members that any case must be determined on its own merits.

    Case study 3

    The PGC has come across an instance where failure to properly read all appendices and attachments to reports, letters, and other correspondence might have led to, or supported, a case for professional misconduct. Members are advised that they should read all such appendices, etc even if it appears unlikely that they may be relevant.

    Case study 4

    Paragraph 6.1 of the PCS states that:

    ‘A member must make full and timely disclosure to the client of any financial interest which the member or the member’s firm may have in any assignment that the member undertakes for that client or in its outcome. Financial interest includes direct remuneration, direct and indirect benefits, commission and introductory fees paid by or to the member or to the member’s firm.’

    A member was advising his/her firm on the transfer of client funds between investment accounts so that clients got the benefit of the best available rates. At the same time the firm was receiving commission from the organisation(s) where the funds were being invested. The PGC advised the member that the profession expected the member to ensure that the receipt of such commission is disclosed to the clients, as provided for in paragraph 6.1 of the PCS, even though the member was not giving advice to the clients and the firm was not owned by actuaries.

    Case study 5

    Paragraph 3.4 of GN 29 states: ‘A scheme actuary who expects to be absent from the office for a prolonged period must consider whether or not to resign the appointment. A scheme actuary must put in place arrangements for the trustees to be advised of the need to appoint a new scheme actuary if he or she becomes unable to act for a prolonged period and is unable to advise the trustees of the fact himself or herself.’

    From time to time scheme actuaries may find themselves unexpectedly having to be away from work (eg for health reasons). In such circumstances it is commonly the firm’s designated senior actuary who ensures that the trustees are contacted.

    The PGC has recently been asked to comment on what it considers to be ‘a prolonged period of absence’ before a firm must trigger the formal process set out in paragraph 3 of GN29 relating to resignation letters, notifications to OPRA, and resignation statements, etc.

    It is debatable what period counts as ‘prolonged’. While it is necessary to ensure that there is consistency between the approaches taken to absences owing to holidays and ill health, as unexpected events could require action by the scheme actuary, there is frequently less certainty about the likely duration of a period of ill

    health than of a holiday.

    The view of the PGC is that if the period of absence is one month and the firm has taken appropriate action to deal with the absence, including identification of any likely formalities required, then this would not be regarded as a breach of the GN29 requirements. If, however, the period of absence were to extend beyond one month, it would require to be reviewed.

    It is of course important that each case is dealt with on its own merits and members must recognise that there will be situations where it would not be appropriate to wait for one month before meeting the full requirements of paragraph 3.4 of GN29.