Pensions - Articles - Reply to consultation on Technical Actuarial Standard 100

  We have focused on high level comments rather than responding to your specific questions in turn.

 We believe that the existing version of TAS 100 has been a success – mainly driven by the fact it is concise, principles based and reliant on judgement. These qualities are essential for a standard that covers such a broad reach of actuarial work – both in terms of actuarial discipline but also complexity. We are very concerned by the move away from this approach, in particular the introduction of numerous points that “must” be considered and documented for every piece of actuarial work, regardless of scope.

 Whilst we believe that small improvements have been made in a few areas, our overall assessment of the proposed changes is negative, and we consider them unworkable in some places. We believe your impact assessment significantly underestimates the level of additional work involved in complying with a significantly longer and more complex statement – the cost of which will inevitably be passed on to users.

 Moreover, we are not aware of any compelling reasons within the pensions industry why such significant amendments are needed.

 The proposed changes do not appear to be prompted by any significant existing issues with TAS 100 that could not otherwise have been addressed by publishing additional guidance, or a more modest change to the existing TAS 100. Your consultation paper raises a concern that the current principles-based approach has led to a range of interpretations and practices. We see this as being entirely appropriate and indeed preferable given the wide range of advice (in terms of scope and subject) and indeed users of that advice.

 This feedback is from the perspective not just of actuaries involved in producing compliant advice but also from users, notably from professional trustees, who would frequently be users of actuarial advice.

 We strongly question the benefits of this philosophical shift and, given the planned move of regulatory oversight to ARGA, question whether such decisions should be made in the short term.

 We are particularly concerned regarding the demotion of the proportionality principle to supporting guidance rather than including it within the core document, and the increased use of ‘must’, removing significant areas of judgement as to what is proportionate or relevant to the task at hand. The assertion that any work that does not fully detail all elements of the application statements ‘does not meet regulatory expectations’ simply emphasises the departure from a proportionate principles-based approach to one that is heavily rules and checklist based.

 It appears that large amounts of additional information may be required to be included within communications to clients, running contrary to the requirement to exclude information that is not material. Even more information is required within the full documentation written in a format that could be read by the user on request – this is a significant step change in the documentation requirements that will have a large impact on costs, with little benefit.

 Far from providing assistance, the draft guidance on proportionality appears to reinforce that there is little room for proportionality. It states for example (2.9 and 2.11) that you must always document all aspects of judgement (with supporting justification) and all possible risks (even immaterial ones, which you must then justify as to why they are immaterial). For an experienced Scheme Actuary, a large number of judgements underlying routine tasks will be second nature and documenting and justifying each of these for every task (particularly one that is very limited in scope) is clearly not proportionate. The only way it could be viable is through the use of large standard checklists, distracting and potentially detracting from scheme specific consideration.

 This would also result in significant extra costs, particularly for smaller pieces of ad hoc advice, which would be passed on to users.

 The wide definition of material (which includes anything that might influence the decision) means that the list of potential risks for even a simple pensions task would be extensive and disproportionate to document in detail for each and every case. This is then compounded by the further requirements to document interdependencies, and how the risks might evolve over time.

 The further expectation within A1.4 that work should consider (and document) any possible actions that may be taken by others in response to potential emerging risks is not practical.

 We would very much welcome the opportunity to discuss our concerns if you would find that helpful.