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TAS 400: Funeral Plan Trusts v1.0
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Technical Actuarial Standard 400: Funeral plan trusts
This standard should be read in conjunction with Technical Actuarial Standard 100: Principles for technical actuarial work (TAS 100) and the Framework for FRC technical actuarial standards. Terms in bold are defined in the Glossary of defined terms used in FRC technical actuarial standards.
Purpose
Technical Actuarial Standard 400: Funeral plan trusts (TAS 400) promotes high quality technical actuarial work for funeral plan trusts on matters where there is a high degree of risk to the public interest. TAS 400 supports the Reliability Objective that "users for whom actuarial information is created should be able to place a high degree of reliance on that information's relevance, transparency of assumptions, completeness and comprehensibility, including the communication of any uncertainty inherent in the information”.
Scope of application
TAS 400 is applicable to technical actuarial work in the geographic scope of FRC technical actuarial standards1 concerning the determination, calculation and verification of the assets and liabilities of a funeral plan trust required by legislation or the rules of the Funeral Planning Authority.
Compliance
Members of the Institute and Faculty of Actuaries are required to comply with TAS 400 for work in its scope. Wider adoption is encouraged.
Judgements concerning the application of this standard shall be exercised in a reasoned and justifiable manner.
Work in the scope of TAS 400 is also in the scope of TAS 100. Each of the provisions in TAS 400 shall be followed where they are relevant to the work.
Departures from the provisions in TAS 400 concerning communications to users are permitted if they are unlikely to have a material effect on the decisions of users.
Nothing in TAS 400 should be interpreted as requiring work to be performed that is not proportionate to the nature, scale and complexity of the decision or assignment to which the work relates and the benefit that users would be expected to obtain from the work.
Communications shall include a statement confirming compliance with TAS 100 and TAS 400.
Commencement date
This standard applies to technical actuarial work in the scope of TAS 400 which is completed on or after 1 July 2017.
Provisions
The following provisions support the principles in TAS 100 and apply to all technical actuarial work within the scope of TAS 400.
Assumptions
1Communications shall explain the derivation of the discount rate, mortality (base rates and projections), funeral cost inflation, expense, tax and other material assumptions.
2Assumptions for base rates of mortality shall reflect the current plan holders of the funeral plan trust.
3Communications shall explain any material difference between the actual experience emerging over the period since the previous exercise carried out for the same purpose (if one exists) with that assumed in that previous exercise.
Models
4Communications shall explain any changes in the measures, methods or assumptions since the previous exercise carried out for the same purpose (if one exists) and quantify the overall effect on the results.
Communications
Estimating the value of liabilities
5Communications shall explain the obligations under the trust deed underpinning the estimate of the liabilities of the funeral plan trust and describe where the liabilities of the funeral plan trust may differ from the liabilities of the trust-based funeral plan provider.
6Communications shall explain how risks to, and uncertainty in, the liability cash flows have been taken into account in the estimate of the liabilities of the funeral plan trust.
7Communications which include an estimate of the value of the liabilities of the funeral plan trust which is not a best estimate shall include a best estimate of the value of those liabilities; and an explanation of the change to the relationship between the estimate and the best estimate from the previous similar and related exercise, if any.
8Communications shall explain any allowance for discretionary elements in the amounts payable from the funeral plan trust in the estimate of the liabilities of the funeral plan trust and how the allowance has changed since the previous exercise carried out for the same purpose (if one exists).
Illustrating cash flows
9Communications shall quantify the liability cash flows expected to arise in each 12 month period following the effective date of the estimate of the liabilities of the funeral plan trust for an appropriate number of years with an explanation of why the number of years chosen is appropriate.
10Communications shall explain how the estimate of the liabilities of the funeral plan trust is derived from the liability cash flows.
Estimating the value of assets
11Communications shall include an explanation of, and a rationale for, the measures used to quantify the value of the assets; and if the measures used are not fair value measures, an estimate of the fair value of the assets.
Communicating risk and uncertainty
12Communications shall include sufficient actuarial information to enable users to understand the sensitivity of the current financial position and the potential future development of the financial position of the funeral plan trust to:
- risks arising from closure of the funeral plan trust to new business;
- risks arising from differences between the nature, term and characteristics of the liability cash flows and the nature, term and characteristics of the cash flows from the assets of the funeral plan trust; and
- all other material risks.
Approved on 7 December 2016
Version 1.0
Effective from 1 July 2017
Financial Reporting Council 8th Floor 125 London Wall London EC2Y 5AS
+44 (0)20 7492 2300 www.frc.org.uk
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The geographic scope of the FRC's technical actuarial standards is limited to technical actuarial work done in relation to the UK operations of entities, as well as to any overseas operations which report into the UK, within the context of UK law or regulation (paragraph 5.5 of the Framework for FRC technical actuarial standards). ↩