Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • December 2012
12

MPs should take lead on risk-sharing, say consulting actuaries

Open-access content Friday 14th December 2012 — updated 5.13pm, Wednesday 29th April 2020

Introducing a risk-sharing pension scheme for MPs could encourage other employers to do the same, according to the Association of Consulting Actuaries.

2

Publishing its response to a consultation on reforms to MPs pay and pensions yesterday, the ACA backed plans for a cash balance approach to MPs pensions. This involves the pre-retirement investment risks remaining with the employer - in the case of MPs, this is the taxpayer - while the post-retirement investment and longevity risk is transferred to the member.

The consultation proposals were published in October by the Independent Parliamentary Standards Authority, the body set up in 2009 to monitor and control MPs pay and expenses. They aim to address the high cost of the current final salary pension scheme for MPs, much of which is met by the taxpayer.

Since 1999, the costs of the scheme have increased by nearly 50% as a result of increased accrual rates and longevity, poor investment returns and other factors.

ACA chair Andrew Vaughan said: 'The government is keen to facilitate a pension regime that encourages cost- and risk-sharing schemes. It seems to us that if some sort of risk-sharing design was introduced for MPs then that might pave the way for other employers to do the same.'

He added, however, that the comparisons used in the consultation between different types of schemes could work against the adoption of a cash balance approach because the projected benefit illustrations given make a cash balance plan look less favourable than the career average design.

This is because the assumed annuity rates used in the 'classic' cash balance plan set out in the document are more expensive than the assumption used to cost pensions in payment in the career average design used.

The ACA recommended a modified cash balance plan, such as one where the investment and inflation risk that the scheme member pays for via their annuity rates is retained by the employer and only the longevity risk is met by the scheme member.

Vaughan added: 'A modified cash balance plan may be more attractive for MPs and so increase the likelihood of such schemes being introduced more widely in the UK if the MPs were to take the lead.'

This article appeared in our December 2012 issue of The Actuary .
Click here to view this issue

You may also be interested in...

Pension buyout activity accelerated in third quarter, says JLT

A total of £2.5bn worth of pension buyout deals have been finalised so far this year, after the third-quarter saw de-risking activity accelerate, JLT Pension Capital Strategies said today.
Monday 10th December 2012
Open-access content

State-funded pensions for councillors should end, says government

The government has announced plans to end ‘taxpayer-funded’ pensions for local government councillors in England, saving an estimated £7m a year of public money.
Wednesday 19th December 2012
Open-access content
2

Government urged to act quickly on pensions regulatory reform

The government has been urged to move forward as soon as possible with plans announced in yesterday’s Autumn Statement to address the rising long-term cost to companies of pension provision.
Thursday 6th December 2012
Open-access content
2

Osborne plans regulatory change to address pensions affordability

Chancellor George Osborne has announced plans to change the regulatory system for defined benefit pension schemes to address concerns over the long-term cost of pension provision to companies.
Wednesday 5th December 2012
Open-access content

Capita warns men against rushing annuity purchases

Men have been warned against rushing into annuity purchases before new European rule changes banning gender-specific insurance contracts take effect later this month.
Tuesday 4th December 2012
Open-access content
2

Pension deficits increase to £110bn

The combined deficit of the UK’s private sector defined benefit pension schemes increased to £110bn last month, according to figures published today by JLT Pension Capital Strategies.
Monday 3rd December 2012
Open-access content
Filed in
12
Topics
Pensions
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Reserving Analyst

London (City of)
Negotiable
Reference
149485

Senior GI Modeler - Capital and Planning

London (Central)
£ excellent
Reference
149436

Risk Oversight Manager

Flexible / hybrid with a minimum of 2 days per week office-based
£ excellent
Reference
149435
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ