UK - Actuaries are considering whether discontinuance valuations should be part of the profession's guidance notes.
The valuations show trustees and members how well funded a scheme would be if it was wound-up and converted into annuities.
The Actuarial Profession, which will be carrying out an in-depth consultation on the matter, believes the valuations play an important role in managing member and trustee expectations.
Deputy chairman of the Faculty and Institute of Actuaries’ Pension Board Wendy Beaver said: “We would want to see something that would give some indication of the extent which accrued benefits would be covered in the event of scheme closure or discontinuance.”
She added: “This is hopefully an unlikely scenario for many schemes, but we do believe that it is very important.”
The guidance note – GN9 – currently advises actuaries on what should be in their valuation reports to trustees and a summary of data.
One item the review is unlikely to cover is the methodology surrounding actuarial valuation methods, an issue that has split the entire profession.
Beaver said the profession had never sought to tell its members what methodology to use and warned that any attempt to do so would provoke the same sort of arguments that surrounded the minimum funding requirement.
Beaver said: “We have never – and do not intend to – imposed a standard methodology because we do not believe that would serve trustees well.”
*Actuaries may fudge the advice they give to trustees on matching liabilities and assets because the profession is split on the issue.
Some actuaries think companies are not fully aware of the insolvency risks their pension schemes pose and that trustees should be told investing completely in bonds is the least risky option.
Others believe giving this advice will oblige trustees to buy bonds, which will not be in their long-term interests. This, they say, will lead to more companies closing final salary schemes.
But one actuary claimed the argument meant that trustees could get conflicting advice from different actuaries. “If the profession cannot decide, how are trustees supposed to?”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers