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The Actuary The magazine of the Institute & Faculty of Actuaries

Life after SIPS

The motto of our profession is ‘making financial sense of the future’. We do not seem, however, to be particularly good at estimating the required number of actuaries. In 1999 I went to a meeting in London on ‘Vision and Values’, not intending to speak. The atmosphere and content was full of such negative feeling about the future of the profession that I felt compelled to stand. I predicted a shortage rather than the surplus that all around me were promising. I was shown to be correct, even with a 25% increase in new entrants. I still hold the same view, while yet again I hear pessimism.

Different trends
Actuaries are astute and innovative when one source of income dries up another is found. The analysis of actuaries’ occupations supplied in the members’ handbook 2001/02 follows roughly the same division as it has for the past 100 years. If a more detailed breakdown were available, it would prove far more interesting. Just under 2,000 were working for insurance offices in 2001, compared with just over 1,800 in 1987 (see table 1). What this masks is a continued rise in numbers working in general insurance. I also suspect that these figures do not show the number of consultants who work for insurance clients.
The figures for consulting in table 1 show an increase from 975 to over 2,300. At least three of the largest insurance consultancies are on record as saying they wish to double their numbers in the next few years. The largest explosion has been in investment and financial institutions; these figures, only recently available, show 347 in 2001. It will take time for supply to catch up with demand, but it will. First will come high salaries, then training courses, then the people. Salaries will stabilise and people will move on to the next fashionable area, just as some moved into pension review from general insurance.

Where to go with pension review actuaries after June 2002?
There is currently an acute shortage of actuaries one only has to look at the adverts at the back of this magazine. There will also be legacy work. New accounting rules for life offices mean that next year at least valuations will have to be produced on old and new bases to permit comparison. On the pensions side, ‘divorce’ is providing a lucrative source of income to some.
How will those actuaries working on pension review adjust to life after June 2002? They are not part of a homogeneous group of people. First, they could be new entrants who have not passed an exam while working on the review or, second, new entrants who have passed some exams. If it were not for the review, these would probably not have found work as actuarial students. Their backgrounds should therefore be studied carefully by the Careers Committee to see where to direct their future efforts as they are continually being exhorted to find students from non-traditional backgrounds. Similarly, these entrants should be studied by the Education Committee, who must not rush into changing the syllabus if failure rates are higher because of these entrants, unless on investigation they come from backgrounds it is desired to encourage. Those who have passed some exams while working on the review, showing commitment, will be snapped up, although they will be treated in a similar way to recent graduates from diploma courses, rather than actuarial students with experience.
Next are those who would have been classified as early retired but for the review and will probably retire with a larger nest egg than they would otherwise have had.
The fourth category are those of middle years who have maintained skills outside the review by working part-time on other issues and will easily increase relevant areas of work. For example, by increasing their workload, those with a scheme actuary certificate might satisfy the current shortage.
This leaves us with the final group: those of middle years who have not maintained skills outside the review. These can be subdivided into qualified and part-qualified. The world is once again their oyster, if they are prepared to undergo an element of retraining. Part-qualifieds may attend one of the masters of actuarial science courses to finish the exams, or may change their status to affiliate. Qualifieds could do an MBA in financial economics.

Help is at hand
Several companies are springing up to help these actuaries decide their future and/or retrain. CUTE (the Combined Universities Tuition and Education company) is one, currently setting up short modular courses to teach customer relationship management as well as using university lecturers and practitioners to explain the different areas available and, where appropriate, to provide in-depth training.
I would reiterate that I do not foresee a glut of actuaries as a result of the end of the review. Actuaries are clever, adaptable individuals and credit for this should be given where credit is due.