Mark Williams, IFoA Pensions Practice Board Chair, on the necessity for pension scheme actuaries to plan for periods of absence.
In the current exceptional circumstances it appears that many actuaries can soldier on fairly effectively – even if, like me, you are surrounded by children who have been given boundless energy by eating through the ice creams in the freezer. Not to say all this is at all easy, but with a decent computer and WiFi many of us can function relatively effectively with day-to-day work.
It is perhaps easy to forget that there is another important aspect to this crisis – we might actually get the virus. Although the mortality rate is low, a more significant number of people will need hospital care or be too ill to work for a reasonable period – including people outside of the ‘high risk’ categories.
In these circumstances we cannot be sure what lies around the corner and for Scheme Actuaries this makes it more important than ever that they have solid contingency plans for any sudden periods of absence.
So what happens in the (hopefully unlikely) event that a Scheme Actuary gets very ill very quickly?
APS P1 says: “A Scheme Actuary must have appropriate arrangements to cover any period during which he/she is unable to fulfil his/her duties as a Scheme Actuary. The arrangements must take account of the length of the absence. Depending on the circumstances, it might be appropriate or necessary to resign the appointment.”
So what are these ‘appropriate arrangements’?
If no time-critical reserved work is expected to be required during a period of absence, it would likely be sufficient to have a suitable ‘number two’ on standby to step up and address any urgent matters that arise.
However, the situation is trickier for any urgent reserved work, which may have significant regulatory and financial consequences if it is left undone and deadlines missed. There is no provision in the legislation for a ‘number two’ signing things on a Scheme Actuary’s behalf.
The only option in that situation is for the trustees to swiftly change the Scheme Actuary to someone else. Unfortunately, that can be a cumbersome process with a number of documents needing to be prepared, drafted and signed (sometimes with a ‘wet’ signature).
For this reason, as well as giving consideration to an appropriate ‘number two’, it would be worthwhile Scheme Actuaries ensuring that full and up-to-date template Scheme Actuary change documentation is available and easy to access at short notice, with all parties agreeing that electronic signatures may be used.
APS P1 also says: “The Existing Actuary must provide the New Actuary with the information that the Existing Actuary considers to be relevant for the New Actuary to fulfil his/her responsibilities as Scheme Actuary”.
Again, Scheme Actuaries should consider what information would be relevant and make sure that any such relevant information is readily available in a format that facilitates a quick and easy transition.
I’ve discussed Scheme Actuaries, but a similar principle of contingency planning is likely to apply to actuaries in other reserved roles. As I said above, these are exceptional circumstances – who would have thought we would be in this situation just one month ago?
Therefore, as we can’t be sure what lies around the corner, it is so important to prepare for all eventualities to avoid causing yet more difficulties for trustees and sponsors of pension schemes or other clients.