Firstly, let’s consider some more generic points
under the principles of the Actuaries’ Code.
Integrity: Following this principle and the concept
of showing professional respect, it would have been wise for Amy and Priya to
communicate with each other once Amy had been appointed. Leonard should have
considered this when appointing Amy. Amy might have assumed that Priya was
aware of her appointment, but, as an actuary, Amy could consider the integrity
principle in terms of the requirement to “show respect for others” and whether
it would be appropriate to ensure that Priya is aware of her appointment.
Impartiality: Amy should have anticipated the
potential for conflicts of interest, if instructed to produce a report
including points that might be interpreted as advice. There’s no problem with
providing an independent opinion, but it would reflect better on the profession
if she’s managed any potential conflicts by communicating with Priya before the
meeting. Amy also needs to consider who
her client is. She’s the in-house actuary employed by MultiBig, but is she
reporting to the employer, or to the trustees? We could assume that she’s there
to provide advice to the trustees and is therefore an “Other Actuarial Adviser”
as defined in APS P1. It
looks like she’s reporting to Leonard. However, Leonard has two roles—that of
FD and Trustee chair, and these roles have the potential to give rise to
conflicts of interest for Leonard.
Communication: Amy should have considered the end
user of her report, and clarified who the report was intended for. She should
also have clarified her position and role, in order to distinguish herself from
the Scheme Actuary. And, perhaps anticipated the risks of her findings being in
conflict with any advice from the Scheme Actuary. She could have discussed her
findings with Priya, particularly if her recommendations involve material
aspects of the scheme which are likely to come under the remit of the Scheme
Actuary. There is no problem with two different actuaries forming different
professional independent opinions—in fact, this can reduce the risk of
“groupthink”. However, there may be a perception of poor communication if
neither is expecting the other to comment on the same matter.
Speaking up: There’s nothing wrong with Amy
highlighting any concerns she has about the pension scheme to the trustees. The
Speaking Up principle requires members to highlight any issues which might
materially impact the decisions of the key stakeholders (i.e. the trustees).
However, she should consider whether it’s appropriate to notify Priya, as
Scheme Actuary, in advance. This is particularly relevant if the work is
reserved work which, by definition, Amy should not be undertaking.
Amy should also consider whether her report and
findings need to be subject to a Work Review or Independent Peer Review in
accordance with APS X2 if
it’s appropriate and proportionate to do so. Priya as Scheme Actuary might be
the natural choice given her understanding of the scheme, and if there are any
confidentiality issues (the ‘Integrity’ principle of the Actuaries’ Code
requires that’ members should respect confidentiality). However, if the issue
is adversarial, Amy might wish to seek a review elsewhere, either from within
the company, or from another source. APS X2 gives
guidance, both on determining whether a review is required, and on selecting an
appropriate reviewer.
APS
P1 (Version 4.0, effective 01 March 2023)
Looking at Amy’s obligations under APS P1: Section 3.1 does
require Scheme Actuaries (i.e. Priya) and Other Actuarial Advisers (i.e. Amy)
to inform the trustees (and relevant third parties) if they become aware of
significant issues, or have material concerns, so there may be justification
for Amy in producing her report, particularly if the nature of Amy’s report is
related to reserved work, and a concern exists with some of the Scheme
Actuary’s advice. There is, however, no specific requirement under this section
to inform Priya in advance of the meeting.
However, Section 3.3
says that this requirement doesn’t apply to Other Actuarial Advisers (i.e. Amy)
if they have reasonable cause to believe that the Scheme Actuary (i.e. Priya)
is fulfilling these requirements. This emphasises the need for Amy to ensure
that she’s satisfied that Priya is fulfilling her requirements. There is still
no requirement for Amy to communicate with Priya ahead of delivering any
findings to the Trustees. However, it may be good practice for both actuaries
to clarify why they may be reaching different conclusions, perhaps in a
separate discussion after the Trustee meeting—though this would depend on the
materiality, in relation to the Scheme, of the points raised.
Of course, if there
are specific concerns about the Scheme Actuary’s role, then Amy should consider
the ‘Speaking Up’ principle of the Code. The IFoA has produced specific
guidance on Speaking Up and, while Speaking Up could include formal reporting,
it’s good business practice, and professional courtesy, to discuss any issues
with the other member first. Priya, as Scheme Actuary, is required under APS P1, to have an
appointment letter that allows her to liaise with other advisers. Amy is not
under any such obligation under APS P1, though there may be
requirements under her employment contract.
If the advice is to
the employer - Section 4 specifically covers conflicts of interest. Section 4.2
says that where an actuary working for the Scheme undertakes work for the
Employer (or, if they’re aware that another person is undertaking work for the
Employer) then they should notify the Trustees of this, and of any conflicts
arising. This applies to both Priya and Amy. If Priya is unaware of Amy’s
appointment, she’s not in a position to know what Amy’s working on. But, if
Amy’s been appointed by the trustees and is drafting advice to the employer,
she needs to ensure that this is clarified in her report, along with any
potential conflicts arising. Amy will be aware that there’s a Scheme Actuary in
place, but Priya won’t necessarily be aware there’s an in-house actuary. Amy
has issued her report to Leonard, and it’s not immediately clear whether the
report is aimed at the trustees or the employer, even though it’s presented at
the trustee meeting.
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