I invite you to participate in this consultation on proposals to introduce an updated version of Actuarial Profession Standard (APS) Z1, by the IFoA’s Regulatory Board (the Board). View the current APS Z1 (233 KB PDF).
APS Z1 was introduced in 2015 and sets out specific ethical requirements that apply, in addition to the Actuaries’ Code, for Members working for UK Trust-based Pre-Paid Funeral Plans.
On 29 July 2022, a new regulatory framework for the pre-paid funeral planning market came into force, overseen by the Financial Conduct Authority (FCA). The framework includes trust-based pre-paid funeral plans that were previously only subject to voluntary regulation by the Funeral Planning Authority (FPA). APS Z1 has been reviewed in light of those changes, as well as the findings and recommendations of the IFoA’s Actuarial Monitoring Scheme’s (AMS) March 2022 thematic review report on funeral plan trusts (540 KB PDF).
This webpage sets out the Board’s proposal to introduce a revised APS Z1, and the rationale for the proposed changes.
The Board welcomes comments on the proposals from individual Members, employers of actuaries, other regulators and anyone else with an interest in the standards which the IFoA sets for its Members.
This consultation asks a number of questions, and we would encourage you to provide comments to support your answers.
We thank you for taking the time to consider these proposals and look forward to receiving your comments.
Neil Buckley
Chair of Regulatory Board
The FCA took on the regulation of the pre-paid funeral planning market on 29 July 2022.
Prior to this, funeral plans were excluded from FCA regulation if they were provided through a contract of whole of life insurance provided by an authorised insurer; or through a trust which met the requirements of article 60(1)(b) of the Financial Services and Markets (Regulated Activities) Order 2001 (RAO).
Funeral plan activities exempt from regulation under the RAO were subject to voluntary regulation by the FPA.
The Funeral Plans Conduct of Business (FPCOB) Sourcebook under the FCA Handbook sets out the rules for Funeral Plan Providers operating in the funeral planning sector.
Chapter 3 of the FPCOB Sourcebook states that a Funeral Plan Provider must arrange for an annual Solvency Assessment Report (SAR) to be carried out by a Fellow of the IFoA.
The purpose of the SAR is to determine, calculate and verify the trust’s assets and liabilities, and to provide information on the solvency status of the trust on a best estimate basis. The liabilities are assessed against the amounts the Funeral Plan Provider puts into trust to ensure they are sufficient for the purpose of providing the agreed funeral.
The FPCOB Sourcebook set out additional areas where actuaries might carry out work for Funeral Plan Providers, including certifying the sufficiency of the arrangements for the transfer of funeral plan business, approving a remediation plan prepared by the Funeral Plan Provider where it is found that the assets of the trust are not sufficient to cover the liabilities of the trust, and approving the withdrawal of any surpluses from the trust.
In addition to the FCA requirements, there may be trust requirements that necessitate the involvement of an actuary. In some instances, for example, the trust deed governing the funeral plan might require the Trustees to instruct a triennial or annual Valuation of the Funeral Plan Trust by an actuary (similar to the legal requirements applying before 2022), separate to the SAR produced for the Funeral Plan Provider under the FPCOB rules.
Accordingly, actuaries play a key role in the development, funding, and overall governance of Funeral Trust Plans.
APS Z1 sets out specific practice area ethical obligations that apply, in addition to the Actuaries’ Code, for Members working for funeral plan trusts.
APS Z1 has been reviewed in light of the new FCA regulatory framework, as well as to ensure that its drafting is in line with other APSs and that references are up to date and there are no wider issues with the standard.
The review also looked at the key findings and recommendations of the AMS Thematic Review report on Funeral Plan Trusts, published on 28 March 2022.
The review of APS Z1 was carried out by the IFoA Executive with practitioner input, including from the Funeral Plans Member Interest Group.
The proposed changes to APS Z1 are as follows:
To read the proposed changes, go to the draft revised APS Z1 (version 2.0) (53 KB Word doc).
APS Z1 is accompanied by a:
These Guides are currently being updated to reflect the recent changes to the regulation of funeral plan trusts and the findings of the AMS Thematic Review report, as well as to ensure the drafting and references within them remain up to date.
Further information about the updated Guides will be provided alongside the feedback to the consultation.
The IFoA is interested in understanding what further resources or regulatory support Members would like to receive in this area. We look forward to hearing feedback from Members as part of this consultation.
The Board considered whether, following the move to FCA regulation, a Practising Certificate (PC) should be introduced for actuaries providing advice in relation to UK Trust-Based Pre-Paid Funeral Plans.
The Board decided it was not appropriate to introduce a PC on the basis it does not fit with the PC Scheme’s overall function as a certification system for ongoing actuarial roles set out in legislation or regulation. This is because under the FPCOB Sourcebook, there is no defined ongoing role that requires to be done by an actuary, but rather specific one-off actuarial activities that require to be carried out by Fellows of the IFoA. The PC Scheme is not a system of certification for individuals to carry out one-off pieces of work.
In summary, the IFoA proposes the introduction of a revised APS Z1 (version 2.0) which extends the professional and ethical requirements for actuaries carrying out Valuations in respect of Funeral Plan Trusts to those carrying out SARs for Funeral Plan Providers.
The aim of the proposed changes is to ensure APS Z1 remains up to date and reflects the recent changes to the regulatory framework for funeral plan trusts.
The changes are considered by the Board to be proportionate, consistent, transparent, and targeted, and have been developed in a way that is principles-based, and outcomes focussed.
The proposed changes are designed to help the IFoA meet its Royal Charter objective of protecting the public interest. View the IFoA’s Royal Charter (1.03 MB PDF).
The scope of the proposed changes is limited to Members who provide advice to Funeral Plan Providers and/or Trustees of a funeral plan trust.
In respect of those Members that the changes will apply to, the changes to APS Z1 simply give effect to the regulatory requirements set down by the FCA in its FPCOB Sourcebook, requiring the preparation of the annual SAR to be by a Fellow of the IFoA.
The aim (and expectation) is that the requirements broadly mirror (and will be no more onerous) than those currently set out for Members who were or are instructed by Trustees to carry out a Valuation of Funeral Plan Trust.
The existing version of APS Z1 and its accompanying guidance is out of date and therefore there is a need for it to be updated.
It is not expected that there will be any significant costs to Members in terms of training etc..
Please provide your response with the (one of the following):
The deadline for responses is 8 May 2023.
Once the consultation has closed, the IFoA will reflect upon the feedback and publish more specific details of any changes. There will also be a period allowed before the changes come into effect so that those affected can take steps to ensure they are able to comply with the new requirements.
Depending on the level and detail of responses, a virtual consultation meeting may be held to discuss the proposals. To help us gauge interest in such an event, we would be grateful if you could inform us of your interest via email at regulation@actuaries.org.uk.