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FRC amends actuarial standards to include Pension Incentive Exercises

PN 021
14 Nov 2012

The FRC has today extended the scope of its technical actuarial standards (TASs) to include actuarial work on pension incentive exercises.

The FRC’s move helps to address concerns that members of defined benefit schemes may be misled by financial incentives being offered into giving valuable pension benefits.

Commenting on the announcement, Olivia Dickson, Chairman of the FRC’s Actuarial Council, said:

“Members who are offered incentives to change their benefits face difficult and complex choices. It is important that members are provided with clear, reliable and sufficient information so that they can take informed decisions. Actuarial work is carried out at various stages of these incentive exercises and can influence the terms of incentives offered and the communications to members. In order to provide greater assurance of the quality of actuarial information provided, the FRC has decided to bring incentive exercises into the scope of the Pensions TAS.”
Notes to editors:

  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
  1. A pension incentive exercise is where a sponsoring or associated employer of a defined benefit pension scheme seeks to remove some or all of its liabilities or associated risks by offering scheme members some sort of incentive to transfer or modify their benefits.

    The most common form of incentive is an enhancement to the calculated transfer value of the member’s benefits in the scheme on the condition that those benefits are transferred out to another form of pension provision which is invariably a defined contribution scheme. These are known as enhanced transfer value exercises (ETVs).

    Another form of incentive exercise is a pension increase exercise (PIE) where the member is asked to give up non-statutory post-retirement pension increases (usually in respect of benefits accrued from employment before 1997) in return for a higher flat rate pension within the scheme.

  2. The industry code of practice for incentive exercises was published in June 2012. The objectives of the Code are to ensure that all incentivised transfers and similar exercises are:
  • done fairly and transparently;
  • communicated in a balanced way and in terms that members can understand;
  • carried out in a way which makes  appropriate regulated and  qualified independent financial advice that is paid for by the employer;
  • able to achieve high levels of member engagement;
  • provided with regulated access to the independent complaints and compensation process.

    The Code can be found at:
  1. Our June 2012 consultation on pension scheme incentives exercises and responses can be found at
  1. The revised Pensions TAS, the FRC’s feedback statement to the June consultation and an updated version of Pensions TAS: Significant Considerations which includes the background to the changes for incentive exercises can all be found at:
  1. All Press enquiries should be directed to: Sophie Broom, Communications Executive, on telephone: 020 7492 2397 or email: or Paul Kennedy, Director of Actuarial Policy, 020 7492 2347 or email:

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