In which actuaries discuss the AGM, the actuarial exam and defined benefits
The editorial team welcomes readers' letters but reserves the right to edit them for publication. Please email [email protected]
The deadline for receiving letters for the July issue is 18 July.
The writer of the letter of the month receives a £25 Amazon voucher
AGM absence is an own goal
If our Scottish Board is serious about raising our profession's profile north of the border, then I would like to suggest a simple, free and effective means of engaging Scottish companies, their shareholders and the general public: contributing to and attending AGMs. I recently attended Standard Life's AGM, where, interestingly, the entire board of directors seemed devoid of any actuaries. Moreover, I was the only actuary who spoke from the floor and I recognised only one other actuary in the entire audience. For a profession that once prided itself on being able to 'make financial sense of the future', our virtual absence from such a forum - where we could add value - cannot be right. And, of course, rather than being merely some parochial issue, this idea could easily be extended to UK plc. In her parting column last month, Jane Curtis seemed to think we have been successful in raising our profile. We may have come a long way, but celebrations are surely premature, so come on, let's get out there and be heard.
Gerry Devenney, 1 June 2012
Multiple choice test
Here's one to warm students up for the next round of actuarial exams. Which would it be better to do first?
a) Change statutory pension increases from being linked to the retail price index (RPI) to being linked to the consumer price index (CPI), causing union uproar, significant additional advisory fees across the pensions industry and a Trust Deed lottery in occupational pensions, leading to resignations and disputes; or
b) Change the calculation methodology gradually over time, so that RPI and CPI converge?
This is a pass or fail question.
Mike Harrison, 12 June 2012
Demise of defined benefits
I have just read the summary of the Xafinity report in the news section of the June issue of The Actuary. I note that defined benefit (DB) plan assets in the UK are about two-thirds of liabilities. Bypassing the intricacies of the definition of liabilities, this suggests to me that if funding requirements and the associated panic buttons were set along the lines suggested in my May 2012 letter, many DB plans would not be considered in deficit. They would, therefore, be comfortable in continuing to make full benefit payments, including what I called bonuses, while they waited for the market turnaround for which we all hope.
As a result, most DB retirees would not have to swallow immediate drops in their payout comparable to those that many current DC retirees must be seeing. Even those whose plans have no excess assets to support bonus payouts would often be no worse off than those DC folk who are taking haircuts now; they could, however, expect to see a recovery if and when the situation turned around and bonus payouts could be resumed.
In terminating DB plans, participants would face permanent haircuts, but they would only be comparable to those that are being taken in defined contribution (DC) plans - all of them, not just those that terminate.
Should we not rethink the rules before the DB plan disappears in the private sector?
Brian A Jones, 7 June 2012
400 Club membership truly broad
Anuj Sharma describes the membership '400 Club' as representing all aspects of the membership of the profession (Letters, June 2012). He may not be aware of just how wide it is. I am a member of the '400 Club' because I volunteered. I have been a junior clerk working for the Army since 2005. Prior to that I was a 'white van man'. My main use to the profession is that I remember why we did things in the past, thus improving the basis on which the future will be planned.
Robert Steel, 2 June 2012
Stop the brain-drain
Regularly in The Actuary we hear the Profession celebrating how there are more overseas student members. The Profession's policy of applying discounts for training actuaries overseas will of course mean a relative growth in overseas student membership; indeed, such policies have surely contributed to the Profession having to declare a shortage of actuaries in the UK. The Profession's higher charges for UK training are funding overseas expansion activities.
The growing supply of UK-trained actuaries abroad and ever-improving communications technology makes it inevitable that UK companies will relocate their actuarial departments overseas, leaving British actuaries on the dole, as companies take advantage of lower labour costs abroad.
UK actuaries who dismiss this scenario should refer to the IT, admin and call centre departments, where such exporting of jobs has already taken place.
David Thomas, 2 June 2012
The editorial team welcomes readers' letters but reserves the right to edit them for publication. Please email [email protected] The deadline for receiving letters for the August issue is 18 July.