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Actuaries and discount rates report published

The report ‘Actuaries and discount rates’ by Chinu Patel and Chris Daykin has now been published. It covers initial research into past and current practice in the setting of discount rates in the UK, and a survey of existing research and debate as part of the Profession’s discount rates project. The paper is available for downloading at www.actuaries.org.uk/patel_Discount_Rates

The steering committee is now seeking views on the report, including ideas for possible further development, from the Profession’s practice executive committees and from relevant external sources.

The discount rates project was set up in 2009 to address the need for the Profession to have a clear and common understanding of the issues surrounding the different discount rates used today across practice areas. It aims to enable the Profession to speak clearly and with authority in future debates about discount rates, to develop frameworks for the future, and to support actuaries in communicating both impartially and effectively.

Initial findings were presented by Chinu and Chris at a forum of thought leaders from inside and outside of the Profession in March this year, and many of the points raised during the lively debate have been incorporated into the final publication. The report covers initial steps towards developing a common language while acknowledging that further work is needed on the most appropriate classification and ways of describing the concepts involved.

The discount rates project will now move on to address the development of a common language for communicating discount rates and risk; developing a common framework for the future where appropriate, including ensuring that the rationale for differences in discount rates is more fully understood and communicated; and considering the impact of any changes.

Open and effective communication will be key to the success of the project, and the committee believes that Chinu and Chris have given the Profession a most useful platform from which to launch its efforts to both explain and enhance the contribution that actuaries can make to this important topic. The work is expected to be completed by early 2011. For further information please contact ruth.loseby@actuaries.org.uk