I was amazed and delighted to read in the President's comment (The Actuary, March 2015) the words "integrating the asset and liability issues and not seeing them as independent from each other". I thought such a basic concept, a staple in my student days in the 1950s, had died in the 1990s. Indeed I believe it did, post Gower Report, when regulations came in, led by forces that could understand deposit accounts and daily prices in the stock markets, and could not stretch to long-term dynamic quantities.
The use of daily market prices, quite irrelevant in the assessment of the ability of the assets to match the liabilities, introduces an exaggerated volatility in surpluses and deficits in the accounts of companies, driving investment policy away from the best interests of employers and members. One government minister has described our financial system as "hard-wired to short-termism".
It was good to read, in the same issue of The Actuary, the article written by Ashok Gupta about the Bank of England study. Gupta's final paragraphs sum up the current unsatisfactory position well under the heading "What else can be done?". My only suggestion is to shout louder.
Way back in the 1960s, the Institute and Faculty of Actuaries published a booklet, entitled An Appeal to Statesmanship. It was prompted by the first attempt by government to introduce a state-wage-related supplementary pension. Included was an assertion, and I paraphrase, that we were promising ourselves that our children would pay to us pensions that are far more generous than we were paying to our parents.
Is it not time for our professional body to speak out again, in the public interest?
Victor Hughff 19 March
