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The Actuary The magazine of the Institute & Faculty of Actuaries

British Actuarial Journal – Volume 11 Part I

This part of BAJ Vol 11 opens with the two presidential addresses. Michael Pomery’s, entitled ‘Restoring confidence in long-term savings’, takes a wide sweep through the issues facing life and pensions customers, firms, and actuaries as society moves from collectivism to individualism. He highlights the risk that we may be heading for generations of impoverished pensioners, and the profession’s role in averting that outcome. This message is sharpened by an analysis of the ‘pensions crisis’ – a confluence of demographic, economic, and regulatory burdens, confusion between surplus and solvency – against which background actuarial practice is evolving. Life actuaries are rather having evolution thrust upon them, post-Penrose, and Michael outlines their new roles and relationships. Finally, he summarises the profession’s corporate plan, meant to meet these and other challenges.

Harvie Brown, in his address to the Faculty, spoke of the professional issues which we need to grasp in the 21st century. All professions are facing change, and self-regulation is fading fast. In its place is appearing a clutch of processes – peer review, compliance monitoring, more hard-edged CPD, practising certificates, revalidation, and a standards board. The common thread is that of maintaining an actuary’s competence, at the level of best current practice (as opposed to best practice when the actuary qualified) and doing so transparently and demonstrably. Harvie describes big changes that are soon to take place, and like Michael, explains the role of the profession’s corporate plan in bringing these changes to all working actuaries as effectively as possible.

Cowling, Gordon, and Speed’s paper ‘Funding defined benefit pension schemes’ is next, with the discussion at the Institute. They analyse the nature of defined benefit (DB) scheme liabilities, valuations, and funding, and the meaning of solvency. They set out ten principles, with the aim of making the position of the fund unambiguously clear to the stakeholders. The interest generated by this paper is shown by the extensive discussion. Most discussants agreed with at least some of the paper’s proposals, though there were a few whose disagreement stemmed from fundamentally different standpoints. Many referred to the importance of this paper for future practice.

Icki Iqbal’s paper ‘Effective decision-making in a life company’ starts by asking what part management may have played in the decline of the life industry. After reviewing decision-making theories and external events of the recent past, Icki discusses decisions made when new personal pensions regimes were introduced, finding them to be flawed. His own analysis introduces ‘management by inequalities’, meaning a quantitative ranking of the value generated by alternative decisions. Several examples are given. Several discussants helpfully related their own experiences of management cultures and decision-making in the past.

Finally, abstracts of papers from several leading actuarial journals are reproduced.