The Financial Reporting Council (FRC) has updated its Technical Actuarial Standard 300: Pensions (TAS 300) to reflect developments in the pension industry, including increased buyout activity and pension superfunds.
FRC’s revised standard includes requirements for the provision of advice on setting actuarial factors and on bulk transfer exercises, including buyout transactions with insurers and transfers to pension superfunds.
This comes as UK DB schemes transferred a record £21.2bn to insurers in the first half of 2023 and Clara-Pensions launching the first superfund earlier last month.
For bulk transfers, FRC said that among other things, practitioners providing advice to a governing body or an employer which is considering a bulk transfer must consider credible alternatives to the potential transaction, any material impact on the protection provided, material risks to the benefits and any changes to the governing body’s ability to make decisions which affect the level of members’ benefits.
Practitioners advising on bulk transfers must also include “sufficient actuarial information” to enable the governing body to understand the range of options available to them and how bulk transfers might affect different members.
When advising a governing body or an employer that is considering a bulk transfer to a superfund, or when carrying out technical actuarial work in connection with the regulatory assessment and supervision of a superfund, FRC said that practitioners must use models that are calibrated appropriately to reflect the time horizon of projections and have sufficient regard to extreme events.
It added that practitioners’ communication on superfund capital adequacy must include an explanation of the uncertainty in the actuarial information.
FRC also said it is considering feedback received to the introduction of Technical Actuarial Standards 310 (TAS 310), which sets out the requirements to collective money purchase pension schemes and will issue a separate feedback statement and impact assessment in “due course”.
The consultation opened In May 2023 and closed on 4 August 2023.
FRC’s executive director of regulatory standards, Mark Babington, said: “Defined benefit pension schemes have a significant potential to support economic growth through greater investment in the productive economy.”
He said that “high quality” actuarial work will support a “well-functioning” marketplace for endgame solutions such as insured buyouts and transfers to super funds.
He added that the revisions to TAS 300 reflect the FRC’s commitment to promoting “high-quality actuarial work” in this sector and increase public confidence in this market as it develops.