In the fifth of our series on the work of the IFoA’s Practice Area Boards, Mark Williams, Chair of the IFoA’s Pensions Practice Board, blogs about changes and developments in the pensions industry. Read the first, second, third and fourth blogs in this series.
This last year has been a very busy one for the Pensions Board, which reflects the amount of change and new developments in the pensions industry.
Defined Benefit schemes: new code of practice
Following on from the Government’s white paper on Defined Benefit (DB) schemes, this new code of practice will be critical to the future work of actuaries on scheme funding.
We have succeeded in getting significant early engagement with The Pensions Regulator (TPR) to help shape the proposals before they go to full consultation, hosting two workshop meetings and attending other discussion events.
A full consultation is likely to take place later in 2019 and in 2020.
Following our feedback and suggestions, a number of key changes have been made to the draft code of practice. This should help ensure the new code is as effective as possible, ensuring the protection of members’ benefits.
However, it will also ensure that actuaries’ vital role in the funding process is protected, encouraging innovation in the advice provided to trustees and sponsors of DB schemes.
Defined Contribution adequacy: the biggest issue of our times
Adequacy of Defined Contribution (DC) schemes is the biggest Pensions issue of our times.
Recognising this, we have commissioned a piece of research, to be released later this year, to provide a new and distinct voice in the DC adequacy debate.
The purpose of our research is to provide a clear and succinct ‘rule of thumb’ message regarding what constitutes an adequate level of DC contribution.
When released, we hope to obtain significant publicity for our new research and ‘rules of thumb’. The central aim of this is to influence the behaviour of scheme sponsors, managers, members and the state.
However, we also seek to significantly enhance the credibility of the role actuaries can play in DC provision and thereby open up new opportunities for members of the profession in this space.
The actuary’s role in new scheme design
Innovation is rife in the pensions industry, with the advent of Collective Defined Contribution (CDC) schemes and development of consolidation vehicles.
We have played a key role in providing a technically thorough and balanced response to key consultations on these new developments, establishing working parties to complete further research.
By leading the way in supporting the development of these new schemes, we are making clear the value that actuaries bring to their design and operation.
Many actuarial employers are developing their capability in this area, underpinned by the support provided by the Pensions Board and others.
Our focus for the next year, largely follows on from the three points above:
- Continuing to work closely with TPR on the development of the new code of practice, providing detailed and high-quality responses to all consultations
- Roll out our research and ‘rule of thumb’ on DC adequacy, making as big a ‘splash’ as possible!
- Continue to provide technical and wider input into the development of CDC schemes and consolidation vehicles
Our work has had a positive impact on members of our community and for the profession more broadly.
We have also, through these projects, had excellent engagement with the Pensions and Lifetime Savings Association, Department for Work and Pensions, TPR, Pension Protection Fund and others, helping to shape their work to ensure it is as effective and impactful as possible.
Better serving our international members continues to be a challenge for the board – how do we genuinely provide support to pensions actuaries around the world, rather than just having ‘token’ or opportunistic input?
However, we do have an international representative who provides a report at each meeting. Through him, and the new president John Taylor, we have developed a relationship with the Singapore Actuarial Society and have made early investigations into a possible combined piece of research regarding adequacy of pension provision.