Professional Documents
Culture Documents
Subject SA4
CMP Upgrade 2014/15
CMP Upgrade
ActEd often produces a free CMP Upgrade, which provides details of changes to the
syllabus, Core Reading and ActEd materials. This year, however, due to the large
number of changes to the Course Notes, Q&A Bank and X Assignments, it is not
practical to produce a full upgrade.
This document provides a brief summary of the major changes so that you are aware of
the main themes of these changes and the chapters that have been subject to the
greatest change.
0 Retaker discounts
When ordering retaker-price material, please use the designated place on the order
form or tick the relevant box when using the e-store.
Students have the choice of purchasing the full CMP (printed or eBook) or just the
Course Notes (printed). You may need to add dispatch charges to the prices below.
Retaker price
2015 printed CMP for those having previously purchased the 62
full-price Subject SA4 CMP
2015 CMP eBook for those having previously purchased the 21 (+VAT in EU)
full-price Subject SA4 CMP
1 Current guidance
The following guidance has been introduced or updated and the changes are referenced
in the notes:
The detail of the Pensions Act 2011 has been expanded in Chapter 1.
The Actuaries Code was recently revised with the latest version (version 2.0)
effective from October 2013.
The Large and Medium-sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 apply to those companies that are registered in
the UK and are listed on a main exchange in the UK or certain other recognised
exchanges overseas.
Taxation regime
Below is a brief summary of the significant changes to the Core Reading and Course
Notes to provide you with an indication of where the numerous changes have been
made.
Syllabus
Syllabus Objective (d) has been extended to reference the Transformation TAS by
adding the words and Transformations at the end.
Chapter 2, Section 2
2014 UK budget
This is introduced in Chapter 3 with further reference and more detail provided through
changes in Chapters 6, 7, 8, 13, 19 and 23. The principal impact is outlined below.
As part of the Budget in March 2014, the Chancellor announced significant proposed
changes to UK pensions affecting defined contribution schemes. Changes are to be
introduced in two stages, summarised as follows:
From 27 March 2014 the withdrawal limits from members funds will be
significantly reduced, enabling members to withdraw more of their pension fund
as cash.
Instead of needing to secure a pension of 20,000 pa before being able to take
the rest as cash, it will only be necessary to secure a pension of 12,000 pa.
The limit on overall pension benefit that can be taken as cash (on the grounds of
triviality) increases from 18,000 to 30,000.
The size of a small pension pot that can be taken as a lump sum, regardless of
total pension wealth, increases from 2,000 to 10,000.
From April 2015 these withdrawal limits will be removed.
Members will still be subject to tax at their marginal rate for cash withdrawals over and
above 25% of their fund.
Chapter 4
The changes to the regulatory approach to funding as reflected in the revised Funding
Code of Practice number 3 are discussed. These emphasise a collaborative approach to
funding between the trustees and employer, with consideration of affordability and the
impact on employers sustainable growth. This is introduced in Chapter 4 and then
reflected throughout the course where funding defined benefits is discussed.
An additional factor has been added to those the trustees should take into account in
order to determine the recovery period. This factor covers affordability and the need to
not place too large a burden on the employer.
Details have been provided on the updated filter mechanism used by the Pensions
Regulator to identify schemes where members benefits appear to be at greatest risk.
Additional reading has been added to Section 7.3, just above Question 4.9, concerning
the PPFs recent announcement that for the 2015/16 levy and beyond a new bespoke
insolvency model will be adopted, using Experian as its service provider.
Chapter 7, Section 4
This section has been updated to reference same sex marriages and civil partnerships.
Same sex marriages were made possible in the UK from 29 March 2014. Where
spouses benefits are concerned, schemes must provide the same benefits as for civil
partners. In practice, schemes are more generous and provide identical spouses
benefits as those provided for spouses of the opposite sex.
A new section (Section 2.10 with the existing Section 2.10 and following sections
moving up a number) has been added to Section 2 covering two asset classes which are
becoming increasingly common among pension schemes. These asset classes are
commodities and infrastructure.
A new section has been added which updates the Myners Principles following the work
of the Investment Governance Group.
Chapter 15
There has been considerable updating to this chapter with reference to current practice.
In particular Sections 2.1 and 3.3 have material amendments.
Chapter 16
Chapter 17
There has been considerable updating to this chapter with reference to current practice
and recent trends and investigations. In particular Section 3.4 and most of Section 4,
but primarily Sections 4.2 through 4.6, have material amendments.
Chapter 18
There has been some updating to this chapter, concentrating on Sections 1.2, 2.1, the
introductory part of Section 3 and Section 6.2.
A new Section 3.8 has been added reflecting the fact that for accounting periods starting
from 1 January 2015 a new standard will come into force, FRS 102.
The key difference from FRS 17 is the removal of the expected return on assets in the
profit and loss account. Instead the assumed discount rate will be used to calculate the
net interest on the net defined liability (ie the difference between the schemes assets
and liabilities). It is anticipated that this will increase the P&L charge, particularly for
schemes investing in return-seeking assets where the discount rate will be lower than
the rate of expected return on the assets.
References to the corridor approach have been removed from Sections 4.5 and 4.6
This section on trivial commutation has been updated, and expanded to include low-
value pension benefits.
Section 3.6 has been replaced with further details on the Assessment Period and in
particular details on the PPFs responsibilities and five stages of the Assessment Period.
The latter is outlined below.
1. Section 120 notice the PPF will be notified of the insolvency event, usually by
the insolvency practitioner of the company.
2. Validation the schemes trustees pass the PPF the information necessary to
determine whether the scheme is eligible.
3. Assessment during this period the scheme will continue to pay benefits, but
subject to the limits under the PPF level of compensation. The schemes actuary
will complete a Section 143 valuation to confirm whether the scheme can pay
benefits at PPF levels or above.
4. Transition the schemes assets and member data are reviewed and transferred
and any contracts with lawyers or other adviser are terminated.
5. PPF scheme the scheme will enter the PPF and members will be notified of the
change.
Glossary
We have updated questions and solutions for the changes in the Core Reading and
ActEd text. There have been changes to the Q&A Bank, and in particular to the X
assignments. Assignments X2, X4 and X5 have been extensively rewritten, and include
new questions.
We only accept the current version of assignments for marking, ie those published for
the sessions leading to the 2015 exams. If you wish to submit your script for marking
but have only an old version, then you can order the current assignments free of charge
if you have purchased the same assignments in the same subject the previous year (ie
sessions leading to the 2014 exams), and have purchased marking for the 2015 session.