The Society of Pension Professionals (SPP) has backed proposed reforms to actuarial standards for collective defined contribution (CDC) schemes, while warning that stability, proportionality and intergenerational fairness must remain central to the framework.

In its response to the Financial Reporting Council’s (FRC) consultation on changes to Technical Actuarial Standard 310 (TAS 310), the SPP said it “very much supports the overall direction” of the proposals, arguing that they would improve transparency, governance and confidence in CDC actuarial work.

However, the industry body stressed that the standards should remain principles-based and proportionate, cautioning against overly prescriptive requirements that could limit professional judgement or introduce unnecessary complexity.

The SPP also expressed broad support for proposals on actuarial equivalence, method choice and the treatment of cross-subsidies, but noted that in practice the scope for method selection may be limited by scheme design and regulatory requirements.

It also highlighted concerns around the potential for excessive volatility if actuarial methods or assumptions were revisited too frequently, suggesting that changes should generally only occur following “material and sustained” shifts in circumstances.

Particular emphasis was placed on how schemes determined the 'relevant period' for assessing actuarial equivalence, with the SPP warning that this must strike a balance between responsiveness and stability.

The response noted that structural membership changes, such as the entry of a large employer, or macroeconomic shocks including inflation volatility, could materially distort outcomes depending on the timeframe used.

“A very short or market-consistent relevant period could cause actuarial equivalence outcomes to be driven by temporary dislocations,” the SPP stated, while longer periods risked embedding cross-subsidies between cohorts.

The SPP also called for greater transparency where assumptions used for actuarial equivalence differed from those used in actuarial valuations, noting that while such differences may be legitimate, they should be clearly explained where they could affect scheme sustainability or intergenerational fairness.

In particular, it warned that commercial pressures could influence assumptions used to demonstrate equivalence, potentially impacting benefit outcomes across different member groups.

Commenting on the response, SPP CDC Committee chair, Keith McInally, said the reforms marked an important step for the growing CDC market.

“CDC is becoming an increasingly important and evolving part of the UK pensions landscape,” he stated.

“The proposed updates to TAS 310 represent a positive step in strengthening transparency and confidence in the actuarial work that underpins these schemes.

“As the SPP’s response makes clear, it’s important that the standards remain principles-based and proportionate, allowing actuaries to exercise professional judgement while ensuring that key issues such as cross-subsidies, assumptions and scheme sustainability are clearly communicated.”

The SPP also supported the proposed implementation date of 31 July 2026, aligning with wider regulatory developments, including the introduction of unconnected multiple-employer CDC schemes.

However, it urged the FRC to provide early clarity if significant changes were made to the draft standard ahead of final publication, to allow the industry sufficient time to prepare.

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