There’s a silly letter in the FT this week which I print in full.
Jo Cumbo’s report “Mortality update bodes well for pension deficits” (May 4) refers to an assertion by PwC that slowing mortality improvements could reduce UK defined benefit pension scheme liabilities by £310bn, which is about 15 per cent of their estimated total liability of £2tn.
In our opinion, this is a relatively extreme outcome and would be widely viewed as such among UK actuaries.
We feel it is potentially misleading to refer to liability reductions of 15 per cent without placing such estimates in a proper context.
Andrew Cairns, Professor, Heriot-Watt University
Deborah Cooper, Risk and Professionalism Leader, Mercer
Cobus Daneel, Consulting Actuary (Retirement), Willis Towers Watson
Sacha Dhamani, Head of Longevity, Prudential
Matthew Edwards, Head of Longevity/Mortality (Insurance), Willis Towers Watson
Matthew Fletcher, Longevity Consultant, Aon Hewitt
Tim Gordon, Head of Longevity, Aon Hewitt
Dave Grimshaw, Head of Longevity Consulting, Barnett Waddingham
Steve Haberman, Professor of Actuarial Science, Cass Business School
Stuart McDonald, Head of Longevity, Lloyds Banking Group
Kevin O’Regan, Head of Longevity and Portfolio Reinsurance, PartnerRe
Peter Tompkins Actuarial Consultant
To which I make three observations
- What is said , is said badly – “a relatively extreme outcome” – relative to what? “Potentially misleading” – either the 15% figure is misleading or it isn’t – you’ve just told us it is so why caveat? The first sentence is too long, the use of the subjunctive in the second sentence drains the statement of any vivacity.
- What isn’t said is what the reader wants to hear – the article leads nowhere.
- The bulk of the copy is used to list the actuaries and their ridiculous titles.
This kind of letter does nothing but bring actuaries into disrepute. They have slagged off PWC (Raj Modhi) but to what end? If they wanted to put PWC’s comment into context, they could have used the space they wasted with their list of titles. They have showed they cannot make a point simply , they have wasted an opportunity to educate the readers of the FT’s letter column.
Is 15% or £320m too high?
Our actuaries at First Actuarial have been asking this same question. They were asking it before PWC put it in the FT , because I asked for them to comment on it.
I have been banging away about the changes to the IFOA’s continuous mortality research ever since Douglas Anderson mentioned them to me 5 months ago (they agree with Vita Life’s own research). You know this if you read this blog.
Their general feeling is that 15% is too high, the reduction in the rate of increase in life expectancy is probably a blip and will be explained as an anomaly in time, it is too early to reduce pension scheme liabilities (certainly by 15%). That is a reasonable position to adopt – “wait and see” is a prudent policy when you are dealing with problems that have durations measured in decades.
But that is their opinion and the conversation is “ongoing”! It is a conversation we are having with our clients and with Government and with anyone who will have it with us in formal and social media! It is a great conversation to have.
Is this worth this public attention?
You bet it is! What the actuaries are arguing about has immediate impact
Your State Pension Age – recently reviewed by John Cridland – depends on the outcome of this debate; the Government were supposed to report on Cridland (the deadline was last week), it is such a hot potato – they have left it in the oven till after the election.
The triple lock – one of the key issues of this election, may be more affordable it PWC are right – the IFoA CMI tables are key to this issue.
The Royal Mail – is in dispute with its 130,000 staff and the CWU as to whether it continue to promise them a pension for life – or just a sum of cash at retirement.
The PPF/ Tata Steel/BHS/ Cluttons/ Bernard Matthews and the Pensions Regulator are engaged in complex and sometimes acrimonious disputes over the affordability of the pensions promised by the employers in the middle of that sandwich.
Everything from our wages to our council tax bills is impacted by the collective life expectancy of the 60 million of us who live in Britain. It is not just our propensity to die (mortality) that is in question, it is our propensity to detoriates in health as we close in on death (morbidity). Understanding what our liabilities are for ourselves , our children and our parents is critical to how we manage the public finances.
Time these actuaries stopped arguing among themselves!
This is not PWC’s fault. Raj has put some good stuff into the papers and has aroused a public debate. The silly letter looks no more than a marker for internal squabbles at the Institute and Faculty of Actuaries. The debate is more important than to be conducted behind the IFOA’s closed doors.
This blog is open to any actuary who wants to put forward a point of view about this which is framed in language that ordinary people can understand. It is also open to Con Keating!
I will continue to look at the affordability of old age in my articles – offering an “inexpert” view.
Actuaries should be taking the debate to us
All these views will be shared with anyone who reads this blog and I expect most of them will contradict each other. That is not a bad thing. What is bad is for actuaries to complain about “relatively extreme outcomes” and “proper context” without any explanation of what they mean – as if their disagreement meant something to those outside their magic circle.
There are many ways to get people engaged with these questions, you can comment to the newspapers, or blog, or tweet, or you can do work with trustees and employers and you can even explain these things to ordinary working people through financial education sessions.
But please actuaries – don’t belittle yourselves again -with your silly letters to the FT!
You can read the silly letter in its original context here https://www.ft.com/content/ee61cf36-3630-11e7-bce4-9023f8c0fd2e