The UK government is preparing to publish a draft bill later in 2025 that impacts actuarial regulation.
Background
The Draft Audit Reform and Corporate Governance Bill is expected following its inclusion in the King’s Speech in July 2024. This follows on from the previous government’s May 2022 consultation on audit and corporate governance.
The consultation made a series of recommendations on the oversight and regulation of the UK actuarial profession, namely:
- The Financial Reporting Council (FRC) becoming a statutory body with powers to oversee and regulate the actuarial profession in the UK.
- That regulatory responsibility being focused primarily on individuals who undertake public interest actuarial work. The new body having additional statutory powers to set technical actuarial standards for IFoA members, concerning their actuarial work, including their non-public interest work, for individuals or entities.
The planned legislation stems from earlier government reviews prompted by concerns over UK audit quality after high-profile corporate collapses such as Carillion and BHS. The Kingman Review examined the role of the FRC.
Currently, the FRC oversees the IFoA’s regulatory role via a memorandum of understanding and has a specific role in the setting of UK Technical Actuarial Standards (TASs).
Draft Audit Reform and Corporate Governance Bill
Policy proposals based on the government’s consultation response are now expected to be introduced through a Draft Audit Reform and Corporate Governance Bill. Announced in the King’s Speech in July 2024, the bill’s introduction is subject to parliamentary schedules.
Actions taken by the IFoA
The IFoA has been actively engaging with the government, the FRC, and other stakeholders since the Kingman Review in 2018 to shape the future regulatory framework.
It has been doing this through its Council-designated Regulatory Strategy Steering Group. This group comprises the presidential team, Council members, senior volunteers, the chair of the Regulatory Board, independent non-executives, and the IFoA Executive. It has been crucial in understanding the proposed legislation and formulating the IFoA’s response.
Throughout, the IFoA has sought to highlight several key concerns ahead of a draft bill to mitigate any unintended consequences brought about by any proposals, including:
- The possible introduction of ‘opt-out’ regulation: There is a risk that the proposals would regulate public interest actuarial work and non-public interest actuarial work, but only for IFoA members. This was the position set out in the white paper proposals of the previous government. This means IFoA members would be able to ‘opt-out’ of non-public interest work regulation by rescinding their IFoA membership. Such regulation would be disproportionate and badly drafted in its nature. In effect, it would amount to statutory regulation that’s voluntary by membership of the IFoA.
- Concerns around a disproportionate regulatory burden on IFoA members: Relatedly, we have had a concern that the burden of regulation should be proportionate and risk-based. In particular, it should avoid placing a compliance burden on actuaries which is not applied consistently to the market as a whole.
- Negative impact on the UK’s international competitiveness: The UK actuarial profession is globally respected. The IFoA is the UK Royal Charter professional body for actuaries and is also one of the largest global actuarial bodies with members in 119 countries. The IFoA delivers high standards for 34,000 members worldwide, overseeing actuarial education at all stages of qualification and setting professional codes and disciplinary standards. The legislative proposals could therefore radically alter how actuarial standards are set for members in the UK and abroad. The UK is moving further away from the international regulatory structure of actuaries, such as in the US and Australia, by introducing a regulator involved in the details of actuarial regulation. Additionally, actuaries are currently regulated by several regulators: PRA, FCA, FRC and TPR . There is a risk of regulatory duplication in the UK contributing to this international disparity.
- Increased costs for employers: The costs of regulation in the UK have continued to rise in recent years. There is a real risk that insufficiently focused and disproportionate proposals add further cost, ultimately borne by the sector and clients.
This proactive engagement has included extensive discussions with government ministers, civil servants, parliamentarians, the FRC, trade bodies, and industry stakeholders.
The IFoA also provided written responses to the Kingman Review in August 2018 and the 2021 white paper in June 2021, outlining its position and providing necessary context.
Next steps
The IFoA will continue to closely monitor the government’s progress. We will provide further updates as soon as more information becomes available, particularly following the anticipated publication of the draft legislation.
Key next steps include:
- Monitoring legislation: Closely tracking the progress and details of the Draft Audit Reform and Corporate Governance Bill as it is introduced to parliament.
- Ongoing engagement: Continuing to engage with the government, FRC, and other stakeholders to ensure the legislation is proportionate and effective.
- Member updates: Providing timely updates to IFoA members on the developments and potential implications of the bill.
- Seeking member feedback: Providing opportunities for members to share their insights and feedback on the proposed legislation.
The IFoA is committed to working constructively with the government and the FRC to achieve a sustainable, proportionate, and world-leading model for actuarial regulation that serves the public interest while supporting a thriving and competitive profession.
