Tim Sacks outlines the results of a recent salary survey.
The geographical concept of the 'northsouth divide' has long been considered as an oversimplified and outdated spatial model for the disparity in wealth between different parts of the UK. Within the actuarial profession this has become increasingly obvious. The overall remuneration received by qualified actuaries used to be greater with proximity to London, with a few pockets of wealth outside the capital.
However, evidence from a recent survey shows that although actuaries in London receive higher salaries than the rest of Britain, the Scottish actuarial centres of Edinburgh and Glasgow have seen salary growth at least equal to the south-east of England and are increasingly competing with London. Even the lowest-paid actuaries in Britain, those in the south-west, are only 22% worse off on average than their counterparts in London.
Cost of living
This comparison obviously does not consider the cost of living, or the expectations of actuaries living in this area. Interestingly, when we asked survey participants 'Are you happy with your overall package and do you feel that it is competitive?', more respondents from the south-west responded in a positive fashion than in any other region of Britain, despite their lower average pay.
With the countrywide disparity in basic salaries becoming smaller, other aspects become important when considering a new employer, for example, the type of pension provided.
DB or DC?
The one issue that all employees in the current market actuary or not cannot ignore is that of FRS17 and its effect on retirement benefits. As you read this, it is likely another defined benefit scheme is being either closed to new entrants or wound up entirely. With current annuity rates and poor performance of the stockmarket, defined contribution schemes, although not proven, are unlikely to provide the same level of retirement benefits.
Until recently, the majority of actuarial employers have provided DB pension schemes to their employees. The employee contribution depends on which industry sector they work in. Actuaries working for consultancies report that up to 20% provide a non-contributory scheme. However, for actuaries employed by a life/pensions office, this figure rises to over 90%. While it can be argued consultancies now tend to provide flexi-benefit schemes, enabling employees to choose where to spend the resources included in their package, the disparity is still vast. The obvious conclusion is that the true value of the salary package of actuarial consultants is likely to be less than those of their non-consultancy colleagues.
For those with more immediate short-term needs, annual bonuses are a key feature of any salary package. This year, more than most, the payment of bonuses are in the balance. The markets are down, budgets have been curtailed or frozen, and profits in general are lower. Those working in the investment market have historically received higher bonus payments than life actuaries working for an insurer, but whatever area of actuarial specialism, the bonus can form a substantial part of annual income. The results of this survey could only illustrate the percentage bonus for last year. The interesting figure will be the comparison of this figure with that of 2002 and 2003.
The aim of any study is to discover anomalies, points of interest, and trends. Generally, the results confirm what is already widely known and understood in any particular market. This does not belittle the results, or make them any less useful in confirming or challenging the markets' view. It does enable interested parties to ensure they are up to date with their own particular field, and for employers to know their staff benefits are not lagging behind the rest.