Spam Prats Dec 15, 2009 No Comments
This is a practice area that was thought to be in decline 10 years ago but which still attracts newly qualified actuaries. Indeed, the increasing globalisation of the profession has made it easier for pensions actuaries to explore new markets.
Pension saving is a newly emerging industry in Asia, where the custom for generations was for children to support their parents in retirement. The one-child policy and changes in social attitudes have meant that this is no longer possible to the extent it was in the past and the current generation is realising that they will not be able to rely on their children to meet all their financial needs in retirement. There are therefore many oppurtunities for actuaries to get involved in the design and implementation of pension solutions in these areas.
In the more established pensions markets, final-salary schemes had seen a steady decline, particularly following the high inflationary period in 2010 and 2011 where many pension schemes were able to afford to ‘buy out’ their liabilities and wind up. We are, however, starting to see the effect of individuals saving less than they need to in money-purchase vehicles and finding that they do not have sufficient funds to meet their needs in retirement.
In some countries, such as UK, centralised savings schemes or ‘personal accounts’ as they are sometimes known have been set up to encourage pension saving, but this is a relatively recent development and many people opted out of these schemes for fear of the effect that they would have on any means-tested benefits to which they would otherwise be entitled.
Some areas are even starting to see the re-introduction of final salary schemes as a way of taclikng the problem of insufficient retirement savings. These are a new breed of scheme, however, where only a base level of pension is guaranteed and any pension increases, contingent spouses’ pensions or other uplifts are only provided where there are sufficient funds in the scheme to do so.
Actuaries have been at the forefront of these developments, helping to design pension solutions that protect the sponsor from unlimited risk, while still providing some level of risk pooling and security for pension scheme members.