UK - Several pension funds are considering legal action over current and historic advice given by their actuarial consultants.
The schemes – which cannot be named for legal reasons – are questioning advice they have received in the last 10 years over:
- Funding levels.- Investment strategy.- Employee and employer contribution requirements.- The viability of the sponsoring employer to fund the scheme.
And lawyers believe a spate of cases against the country’s top consultants could ensue.
Dickinson Dees associate Tushar Bhate said: “A lot of pension funds in the UK are currently examining closely both the historic and current advice they have received or are receiving from their actuaries with a view to making claims.”
Bhate says actuaries often act for both the sponsoring employer and trustees, which can lead to a conflict of interest as one party’s interests are promoted at the expense of the other’s.
“This is a critical area for clients to examine and challenge the cavalier disregard actuaries have to conflicts of interest and test the cosy relationships that have existed in the past.”
Bhate added: “The Actuarial Profession has very weak guidelines and practices in respect of conflicts compared, say, to the legal profession and our view is that most, if not all, actuarial firms are vulnerable to potential claims.”
But Institute of Actuaries’ president Jeremy Goford rejected Bhate’s criticism.
Goford said: “Many trustees choose to be advised by the same actuary as advises the employer. Our code of ethics requires actuaries to consider whether it is possible to accept both appointments. If it is appropriate to do so, there must be total transparency at all times.”
Lawyers, though, say the increasing inability of actuaries to get adequate indemnity insurance, seeking to cap their liability for negligence combined with the limitation period in which a valid claim can be made means that trustees and employers should take action against actuarial firms now.
Bhate added: “If they fail to do so, they may be on the receiving end of a claim themselves from members of schemes who have suffered as a result of the deficits or employers becoming insolvent.”
The Pensions Regulator (TPR) has set out plans to use "new regulatory initiatives" with over 1,000 schemes as it aims to tighten its regulatory grip and boost member outcomes.
HM Revenue and Customs (HMRC) has announced it is delaying the provision of data that will enable pension schemes to confirm the guaranteed minimum pension (GMP) benefits to pay to members until the end of the year.
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