The Practising Certificates Committee provide an introduction to the Practising Certificates Scheme and Q&A raised by members on the changes that came into effect this year
A Practising Certificate is required for members of the Faculty and Institute of Actuaries to carry out reserved roles. The Practising Certificate Scheme governs how Practising Certificates are awarded. A new Scheme came into place on 25 January this year with some improvements following feedback on 1 September. The Practising Certificates Committee consists of 15 members from a variety of fields of actuarial work, a lay member and a secretary. It is chaired by Gary Hibbard. This article by the Committee provides a short guide to Practising Certificates and Q&A to common questions asked by members following the recent changes."
Suitably qualified actuaries of the Institute and Faculty of Actuaries carrying our certain 'reserved roles' must hold a Practising Certificate (PC). There are currently around 1200 members of the profession holding a PC. The purpose of a PC is to demonstrate, in the public interest, that an actuary is fit and proper and has the necessary skills and experience to carry out work as an actuary acting in a reserved role. PCs enhance the Profession's standing with regulatory bodies, assuring users of actuarial services that the member has met the Profession's minimum conditions to act in a reserved role.
Of course, a PC does not otherwise speak to the actuary's capability to carry out non-reserved work. It is not a kite-mark for actuarial services in general.
This article overviews the operation of the Practising Certificate Scheme and highlights certain themes arising from changes that were introduced on 1 September 2012. All members with PCs ('PC holders') were sent details of those changes by email and full details are set out on the Profession's website:http://www.actuaries.org.uk/regulation/pages/statutory-roles-and-criteria-practising-certificates..
The Profession has operated a PC regime since 1990 when life insurance Appointed Actuary certificates were first issued. These were superseded in 2004 by PCs for Actuarial Function Holders, With-Profits Actuaries and Reviewing Actuaries. PCs were extended to Pension Scheme Actuaries in 1996 and, in 1999, to Syndicate Actuaries working in Lloyds of London. Whilst the PC regime itself and how it operated changed relatively little, the expectations of the outside world of professions, and of actuaries in particular, grew significantly.
In 2009, as part of a broader strategy to reinforce public confidence in the quality and expertise of the actuarial skill set, a working party was set up to review the PC regime. The review covered policy, governance and administration. It was wide-ranging including how other professions regulate their equivalent of PCs, and noted a number of areas where the Actuarial Profession could improve. Recommendations were put to members in a consultation exercise in October 2010. The recommendations were designed to
- Strengthen the eligibility requirements to be granted a PC
- Reduce the reliance on self-certification of eligibility factors
- Improve the transparency and consistency of operation of the PC Scheme across practice areas.
Over 950 members responded to the consultation. There was a range of views on the direction and detail of the recommendations which helped the Profession finalise its response to the consultation in May 2011. Overall, there was majority support for each of the recommendations.
New Practising Certificates Scheme
The new PC Scheme was launched on 25 January 2012.The main changes to the regime that operated before 25 January 2012 are set out in the table below.
The role of the Practising Certificates Committee
The Practising Certificates Committee (PCC) operates the PC Scheme with support from the Instistute & Faculty of Actuary's Membership Team at the base in Edinburgh, Maclaurin House. The PCC reports to the Professional Regulatory Executive Committee. A key part of the PCC's role is to ensure the integrity of the Scheme and protect the public interest in its administration.
This means that the PCC administers the Scheme fairly and impartially. It is for each member to provide sufficient information with their application to demonstrate how they meet the criteria. The PCC cannot assume that the applicant meets the criteria nor is it the role of the PCC to interpret or apply the criteria more favourably for one group of actuaries compared to another e.g. assume long standing actuaries have more recent and relevant experience than actuaries applying for a PC for the first time (or vice versa), or favour actuaries working for large firms compared to those working for small firms (or vice versa) etc.
The Scheme is subject to annual review. The intention is to make any changes or updates effective on 1 September each year, when the fee for a Practising Certificate is also reviewed, unless there are special reasons to do otherwise. Changes to the Scheme will be notified by email to existing Practising Certificate holders and through practice area newsletters and on the Profession's website.
The first such review was carried out in mid 2012 based on feedback on the new Scheme and issues and themes identified from around 500 applications made under the new Scheme to the mid year. Whilst there were no fundamental changes in this first review, some FAQs have been added to clarify certain aspects of how the Scheme works and, going forward, all applications must be typed.
The overview of changes effective from 1 September are set out in a letter from Sir Philip Mawer, chair of PREC, on the Profession's website at http://www.actuaries.org.uk/research-and-resources/documents/practising-certificates-committee-2012-practising-certificates-sc-1.
This section explores some themes that have arisen in administering the Scheme and on which some further information may be helpful for applicants.
Is the new Scheme more regimented than before? Are the rules too tight?
Some members are concerned that the new Scheme is more regimented, the generic and technical criteria more tightly defined than before, and that the PCC may be limited in its ability to balance the merits of an application. Of particular concern are applications where the member has extensive experience of reserved type work but little, if any, in the recent past (i.e. the last four years and the last year in particular).
The new Scheme has been improved in a number of areas - see table - but the basics are unchanged: the criteria (generic and technical) remain more principles-based than rules-based and, as with the previous Scheme, the applicant has to demonstrate how they meet those criteria.
Of course, the Scheme has to be administered consistent with its aims. This is in protection of the public interest. And the application process needs to be fit for purpose, practical and balanced. If applicants provide the required information and demonstrate the experience needed to meet the criteria to be awarded a Practising Certificate, then a Practising Certificate will be awarded.
The criteria are clearly laid out and the vast majority of members frame their applications fully and clearly without the need for further questions. In about 10% of applications to date, the PCC have had to go back to applicants to add more detail into their applications or answer clarifying questions. In some cases, it appears that the applicant had not read the guidance or looked at the example technical experience forms before making their application. The PCC anticipate that these transition-related matters will reduce from the next cycle of applications (from 25 January 2013 onwards).
With regard to those members who have long held Practising Certificate but who may not have been as active in reserved work in recent years, the criteria are clear that experience is assessed over the last four years (not five as previously). This was a key consideration in the 2010 consultation. Regulatory and practice requirements in relation to reserved work have great focus, continue to change and a Practising Certificate holder needs to be familiar with those changing requirements and be accountable to users for their advice. In certain respects, how the PCC considers an application from a PC holder or former PC holder returning to reserved work has parallels with how the PCC considers applications from members returning after a career break: this is considered further below.
Does the PCC exercise discretion?
The PCC retain the power to award a PC by discretion: the primary difference to the previous Scheme is that guidance now provides insight into how the PCC may apply its discretion. If, for example, the PCC applies its discretion in a particular case on the basis of an applicant's prior lengthy, but not recent, experience of reserved type work, the Practising Certificate holder will be expected to demonstrate at the next renewal how they have proactively rebuilt their relevant technical experience over the last year as the PCC is unlikely to apply its discretion in this way more than once.
What about career breaks?
The new Scheme looks at the applicant's technical experience over the last four years (an output test), not how many full-time equivalent hours the applicant spent on reserved work (an input test, which was the way the previous scheme worked).
The new Scheme doesn't distinguish between types of career break. The criteria are applied equally to sabbaticals, maternity or paternity leave, illness, other forms of leave or career changes.
Under the output test of the new Scheme, an applicant may have had multiple career breaks but as long as they can demonstrate that they have experience of reserved type work at the right level of seniority during at least three months (not necessarily all consecutive) of the last year, and during three of the last four years, it is likely that a certificate will be issued. It all depends on the nature of the reserved type work the applicant has done. Members considering taking a career break should work at an early stage with their employers to ensure they can demonstrate the required technical experience, working at the right level of seniority including delivering advice to the user.
Relevant experience: does the actuary have to 'do' or is it sufficient to 'review'?
The technical criteria specify certain reserved type work of which the actuary must have relevant and recent experience. The criteria use active verbs like "acting", "advising", "analysing", "assessing", "delivering", "determining", "preparing", "producing", providing", "undertaking" and "working". Some members have queried whether this means the applicant has to have done the calculations, prepared and delivered the advice or whether it is sufficient to have reviewed the work of another actuary?
The issue is what does 'review' mean? If it means that the actuary who signs off reserved work prepared by another can demonstrate that they are at least as proficient in the issues and risks to which the reserved work advice relates as the actuary who prepared that advice, or if it means carrying out critical review of an actuary's work through a formal, professional and independent structure, then such work would typically be sufficient to meet the criteria.
However, peer review work more generally would not be sufficient in itself as peer review tends to be more compliance related in nature.
The key remains that the applicant must demonstrate their role in preparing and delivering the advice.
Why the focus on delivering advice?
Taking responsibility for one's advice, and communicating it to the user, is key to demonstrating professional backbone. The Profession want PC holders to be more than technical experts. Communication skills are important of course but it is more than that. It is about defending, or adapting as appropriate, one's advice to challenge from users and as such we look for sufficient "face to face" contact - not merely written dialogues.
Applicants should not over précis their role in delivering advice - particularly applicants who were not reserved role holders during the last 12 months. One of the main reasons for the PCC to go back to an applicant for more information (see Table 2) is because the application lacked specific examples of delivering advice. Invariably applicants were able to provide (many) examples of delivering advice - e.g. a pensions actuary presenting actuarial valuation assumptions or results to a board of trustees.
The same criteria apply for PC holders in reserved roles, PC holders supporting a reserved role holder (e.g. a number two to a Scheme Actuary), and members applying for the first time to become a PC holder. Although delivery of advice to the user is integral to the work of a reserved role holder, the applicant should still confirm that they have delivered that advice over the last 12 months. The other two categories of member also need to demonstrate explicitly how they deliver advice and take responsibility for that advice. It is assumed that this experience will be of reserved type work but the PCC may consider other examples of delivering advice if the applicant can draw appropriate parallels to reserved type work e.g. a pension actuary who is not a Scheme Actuary but advises companies, not trustees, on pension funding requirements.
The PCC will advise a member if the PCC consider that the member may be at risk of not meeting the criteria next year. This is motivated to be helpful to the member, to give them the opportunity to address their technical experience. It may be because the nature or blend of their work is moving away from reserved type work (under the 3 in 4 year test) because of a career change or because of a recent change of employer resulting in the need to rebuild a portfolio of reserved work (either by securing reserved role appointments or by working closely with other reserved role holders) over the next 12 months, or the Panel may consider that the applicant should get more direct user interaction in terms of delivering advice.
Occasionally, a member says that they cannot provide detail of their technical experience over the last 12 months because to do so would betray client confidentiality. Normally, it is not necessary for the applicant to disclose the user of their advice but the applicant must demonstrate the nature of the technical advice claimed and the applicant's role in preparing and delivering that advice. This can be done by describing technical experience separately for each anonymous User.
A random sample of members will be asked each year to provide evidence of their verifiable CPD. This is part of the CPD Scheme and managed separately to the PC Scheme by the Membership Team. Members will be provided with 12 weeks' notice if they will be audited that year. If you need some help through the process, please contact Patricia McLaughlin at Maclaurin House who will be pleased to walk you through what needs to be done. If you have collected evidence of verifiable CPD as it was earned, the audit process is straightforward.
All PC holders are required to have a Credit and Criminal reference check carried out once every 5 years. These checks validate certain of the declarations made by the applicant in the application form. The information from credit and criminal record checks and other information in the application will be used to assess if the applicant is fit and proper to hold a PC.
Future changes to the PC Scheme
Having been through a fundamental review in 2010-11, major changes to the PC Scheme are not anticipated from next year's review. However, two possible areas of directional change should be noted
1. First, PREC are reviewing the Profession's Education Strategy. This may necessitate future changes to the PC Scheme which will be communicated or consulted on well in advance.
2. The introduction of Solvency II in insurance, and possibly a parallel as applied to pensions under current EIOPA proposals, may necessitate a review of the technical criteria when the FSA's consideration of the role of actuary under Solvency II becomes more clear.
If you have any questions or comments on the Scheme, or you would be interested in being a member of one of the practice area panels, please contact Patricia McLauchlin, ([email protected]).
The article above is from the Practising Certificates Committee which has 15 members - 4 pension actuaries, 4 life actuaries, 4 non-life actuaries, 1 lay member, a chair, Gary Hibbard, and a secretary, Patricia McLauchlin.
Gary Hibbard, chair of the Practising Certificates Committee
Joined the Practising Certificates Committee in January 2010. He is a member of the Practising Certificates Regime Working Party. Prior to that he was a member of the Pensions Practice Executive Committee
He is the current chair of the Pension and Employee Benefit Committee of the International Actuarial Association