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Comments from ACCA
April 2005

The Association of Chartered Certified Accountants (ACCA) is pleased to comment on the above document. At the outset we would raise the issue of the status of the code. It is stated in the draft that there is no penalty for failing to comply with the code’s provisions and that, in any case, it is not necessary for all the provisions to be followed in all circumstances. That being said, there are certain references in the code to statutory obligations – there needs to be a clear differentiation in the text and in the introductory passages between these obligations and the non-mandatory guidance which forms the bulk of the text.

In the context referred to above, we also question the appropriateness of laying down fixed deadlines for, e.g. reporting to the Regulator in cases of failure to reach agreement between trustees and employer. We appreciate the rationale for including some steer as to prompt action by trustees in particular circumstances, but given the aforementioned statements about status, we suggest that the passages which provide reporting deadlines should contain guidance which is more consistent with the overriding status of the code. For example, the code could say that, in the circumstances specified, the Regulator would normally expect to receive a report within five days.

Comments on specific consultation questions

Q1 Are you aware of any schemes providing defined benefits that are not covered by the proposed scope provisions?

No.

Q2 Is it appropriate for trustees to question their actuary about the peer review of the actuary’s work?

The circumstances in which a peer review takes place, and its purpose, are not adequately explained in the draft. But we would agree that trustees should have the opportunity to question their actuary about the peer review of his/her work. It is important that trustees have all possible assistance in understanding the content and quality of advice from actuaries. This is a complicated area and one of which most trustees will have no direct experience.

Q3 Do you think the code provides sufficient guidance for trustees to reach agreement with the employer and manage any conflicts of interest?

In the context of forming a view as to the employer’s capacity to fund scheme benefits, the draft might additionally cross-refer to the trustees’ statutory obligations to report relevant breaches to the Regulator.

Q4 Are there any other ways by which trustees should seek to obtain information about the employer’s ability to provide funding?

Alternative methods of obtaining information, such as questioning banks and auditors, would be undesirable and pose conflict of interest issues.

Q5 Do you agree that professional mediation may have a role to play in helping trustees and the employer reach agreement?

We doubt whether this option will be resorted to or be helpful in most cases, but agree that it is reasonable for the option to be referred to in the code.

Q7 Should trustees take into account any other relevant matters when choosing the actuarial assumptions to be used in the calculation of the technical provisions and, if so, what are they?

We suggest that trustees will need to take into account, additionally, whether the scheme is currently in surplus or deficit (and in the latter case how serious that deficit is) and how this may influence the level of risk tat is appropriate for the scheme.

Q 8 Is it appropriate for trustees to ensure that there is a comparison in the actuarial report between an estimate of the technical provisions and an estimate of the value of scheme assets?

Yes. Given, though, that this passage deals with technical actuarial matters, we consider that it would be helpful for the code to contain some background explanation of what is meant by technical provisions in this context.

Q13 Do you agree that five working days is a reasonable period for reporting to the Pensions Regulator the scheme actuary’s inability to certify, and trustees and employer to agree?

Five days does not seem very long, but after protracted discussions have taken place a long delay should not be acceptable and we agree that some deadline must be set. Therefore, unless there are circumstances where the problem that has prevented the tasks from being completed can be resolved in five extra days then the report to the Pensions Regulator should be sent. In circumstances where a resolution is close, we pose the question whether a brief note to the regulator to that effect would suffice, with a follow up within a week to clarify that the issue has been resolved (or not if that proves to be the case).

Q 14 Does the code provide sufficient guidance to enable trustees to decide whether to report contribution failure?

Yes.

Q 15 Do you believe that the timescale for reports to the Regulator about contribution failures is appropriate?

Again, the same short period of five days in these circumstances is being recommended. If information is required to explain why there has been a contribution failure, then five days may be too short, and we consider that a period of ten days may be more suitable. Within the five day timescale it may only be possible to send a basic statement indicating that a problem exists without explanation; the detail of any causes and remedies would need to follow later.

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