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The Actuary The magazine of the Institute & Faculty of Actuaries

Actuarial conflicts of interest proposals must go further

Responding to the Profession's recent consultation paper on new policy proposals relating to conflicts of interest (The Actuary, 29 September), the firm said that it welcomed the document but that, on the issue of actuaries advising trustees and companies pension scheme matters, the proposals did not go far enough.

Phil Wadsworth, JLT's chief actuarial officer said: "The management of pension schemes in the UK is beset by conflicts of interest for employers and trustees alike. With nearly all UK pension schemes facing solvency deficits affecting the security of members' benefits, there is a fundamental conflict between employers protecting shareholders' interests and trustees protecting members' interests.

"In such circumstances, the only sensible course of action is to separate entirely advice given to trustees from advice given to employers. It is not reasonable to expect any professional (even with the strongest of professional guidelines) to attempt to advise two parties whose interests may be so far apart. In a significant number of cases, it is not even appropriate for the same firm of actuaries to be involved in simultaneously advising the trustees and the employer connected to the same pension scheme."

"In our experience, separating actuarial advice to employers and trustees on pension schemes does not lead to any unnecessary increase in costs. But it does lead to a significant improvement in pension scheme governance and helps to protect trustees and employers alike, in the management of their own conflicts of interest."

"There may, very rarely, be circumstances where it would be acceptable for the scheme actuary (who is the trustees' adviser) to give advice to the employer. But any such cases should be treated as exceptions to the rule and managed outside the normal rules which, in our view, should ban dual appointments of individual actuaries to advise both trustees and employers on a particular pension scheme."

In response, a spokesperson for the Profession said: "The recommendations currently being consulted upon were drafted after a period of extensive discussion and consultation with a wide range of stakeholders including pensions firms and other regulators.

"The consultation process will finish on 10 December and we cannot comment upon individual responses to this process. However, we are grateful for the contribution of JLT and can assure them that their comments will be considered fully, along with the comments of all the other participants in this process."