UK actuaries are facing their biggest shake-up in the past 100 years as the government-appointed expert recommends independent scrutiny of the profession and other measures to address the “quite serious” problems and conflicts of interest it faces.
Sir Derek Morris, the government-appointed head of the review, published his 168-page report. The review said the actuarial profession required independent oversight by the Financial Reporting Council.
This council should create an actuarial standards board to set professional standards and oversee the actuaries’ regulatory and other activities, the review said.
The other main recommendation was to deal with the conflicts of interest currently inherent within most pension funds. Morris said there should be independent expert scrutiny of the pension scheme actuaries’ advice through a choice of risk-based supervision, audit or external peer review.
The review also recommended that the pension fund trustees, the scheme sponsor and the actuary should explicitly agree that they perceive no material conflicts of interest prior to the scheme actuary advising both the trustees and the scheme sponsor.
If any of the three parties think there is a conflict of interest then the trustees should have the option to retain the existing adviser and the sponsor should secure separate actuarial advice.
The review also backed up the Myners review on pension funds by recommending that pension fund trustees should invite tenders separately for actuarial advice, strategic investment advice and fund manager selection advice.
Morris said these reforms would address the “number of quite serious problems faced by the profession in the UK”. The review was ordered in March 2004 after a separate report into the failure of UK assurer Equitable Life revealed a number of failures by the government actuarial department and company actuaries.