​Technical Actuarial Standard 300 Version 2 : At One

Actuaries are nonchalant but ignore it at your peril

Technical Actuarial Standard 300 version 2 with its “must do” bulk transfer v run-on requirement has been in effect for a year.  The first question was, would actuaries comply or deflect?  That downgraded rapidly to, would they read it?  Then the suspicion arose that they had not heard of it.  As for most chairs of DB scheme trustees. They are far too important these days to read source documents and so will not know they can ask for the actuaries’ evidence.  And the lawyers will cover it off with a few well-chosen sentences knowing FRC has little authority. And anyway lawyers go easy on the numbers.

Poor old TAS.  Like most things emanating from the Financial Reporting Council, it's rather good quality but largely ignored.  Three major reports (Penrose; Morris; Kingman) identified actuarial standards as a big problem.  Scrutiny was needed.  Little happened.  But the LDI crisis and the unmonitored, unregulated, explosive growth of the risk transfer market and remarkable indifference to conflicts of interest of actuarial bodies showed they were right.

Ignoring TAS300 is a shame really.  Particularly if the first time you do read TAS300V2 it's in a legal bundle some years hence.

Dear Actuary : re your endgame plan.
It's about the risk-benefit analysis.  Are you sure you did not need numbers to compare bulk transfers with the Credible Alternative of not doing it under TAS 300V2? How did you calculate the downside risk? Seeking discretionary payments for members. Did you value that?

Dear Trustee : re the sell out
I was a member. It's about the risk-benefit analysis.  Did you ask relevant questions of actuaries in accordance with your fiduciary duty to act in the best financial interest of the beneficiaries?  Where's the file they provided and your notes?

So just in case there were to be some interest, here is a link Technical Actuarial Standard 300: Pensions.  For anyone merrily heading on an endgame journey (or who have been involved in risk transfers recently) it is worth noting the highlights set out below.

And with Government rules changing on surplus use and making discretion exercises easier, what was the risk over the last year that made a risk transfer so urgent?  Best interests of members must surely include all relevant information so why not wait for it?  Did these points make the glossy risk transfer sales brochures of consultants or feature in the endless endgame conferences?  No. One way traffic. Odd that.

But Penrose, Morris and Kingman have been heard.  There is a chance that ARGA will radiate authority when turned on later this year. FRC could undertake a Thematic Review of the risk transfer industry reporting standards, covering both its audit and actuarial remits.  It could start now or make it a launch project for ARGA.  NatWest Group’s well-hidden £10 billion asset transfer to a foreign controlled entity, at a £2.4 billion book loss to the Group funded out of scheme surpluses, would make an excellent case study.


Technical Actuarial Standard 300: Pensions Version 2 (TAS300V2): Key Extracts:

Purpose 
1.1. Technical Actuarial Standard 300: Pensions (TAS 300) promotes high quality technical actuarial work in relation to pensions, supporting the reliability objective: To allow the intended user to place a high degree of reliance on actuarial information, practitioners must ensure the actuarial information, including the communication of any inherent uncertainty, is relevant, based on transparent assumptions, complete and comprehensible.

Scope and Compliance
1.7. Actuarial information that is material must include a statement by the practitioner confirming compliance with TAS 100 and TAS 300. Any material caveat, qualification or limitation in that statement must be justified to the intended user. The evidence demonstrating compliance must be available to the intended user, if requested.

5  Bulk Transfers
P5.1.  Practitioners providing advice to a governing body or an employer which is considering a bulk transfer must consider the following: 
a. credible alternatives to the potential transaction for the long-term provision of members’ benefits. Practitioners must consider whether the following alternatives are credible: a bulk transfer to a superfund or an insurer and retaining the liabilities within the existing pension scheme potentially with additional funding and/or security;

P5.2  Practitioners providing advice to a governing body or an employer which is considering a bulk transfer must use as much relevant information as is sufficient and must make use of support from third parties where they judge it necessary in order to obtain sufficient relevant information. Practitioners who have relied on input from a third party should understand how the input affects the output of their technical actuarial work.  

P5.4  Practitioners providing advice to a governing body or an employer which is considering a bulk transfer to a superfund must ensure that models used are calibrated appropriately to reflect the time horizon of projections.

Communications
P5.5. Practitioners’ communications must include sufficient actuarial information to enable the governing body or other decision-making entity to understand the range of options available for the long-term provision of members’ benefits, and how different classes of members might be affected by a bulk transfer. The information provided must include the items listed in P5.1 where material. 
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P5.6. Practitioners’ communications should state any third-party assumptions, data or methodology on which they have relied.


Glossary of Defined Terms

Must	Statements using the word ‘must’ set out mandatory requirements.
Actuarial Information	The output of technical actuarial work, including output from a model designed for direct use by the intended user.
Communications	Actuarial information which meets the reliability objective and is provided to an intended user to assist the intended user in making informed decisions.
Intended User	A person or group of persons whose decisions communications are intended (at the time they are provided) to assist.
Material	Matters are material if they could, individually or collectively, influence the significant or relevant decisions that could be taken by an intended user. Assessing whether a matter is material is a matter for judgement and therefore subjective, requiring consideration of the objectives underpinning the technical actuarial work, the expectations and experience of the intended user and other considerations, such as the significance of resulting commercial or practical implications.
Model	The model is implemented through a set of mathematical formulae and algorithms (e.g. a computer program).
Reliability objective	To allow the intended user to place a high degree of reliance on actuarial information, practitioners must ensure the actuarial information, including the communication of any inherent uncertainty, is relevant, based on transparent assumptions, complete and comprehensible.
Technical Actuarial Work	Work performed for the intended user: (i) where the use of principles and/or techniques of actuarial science is central to the work and which involves the exercise of judgement; or (ii) which the intended user could reasonably regard as technical actuarial work by virtue of the manner of its communication.

TAS300V2 has applied since April 2024.  An update will be in force later in 2025, integrating DWP's requirements for a Funding and Investment Strategy and covering the use of surpluses – recently out for consultation.  All reinforce the need for a basic risk-benefit analysis backed by a financial model.

Links:

Technical Actuarial Standard 300: Pensions Version 2

Technical Actuarial Standard 300: Pensions Version 2.1 Exposure Draft
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