I am glad that I had a go at the actuarial experts arguing in the FT. It didn’t change the way people behaved yesterday – (although several hundred people appear to have spent time reading it) – but it solicited comments from some of the FT signatories – and some from people not on the list who are supposed to be on holiday!
— Hilary Salt (@RedActuary) May 13, 2017
Perhaps we’ll have to extend the definition of “professional” to someone who reads relevant blogs while lying by the pool – actuarially speaking!
It was left to an actuary close to the Plowman to put into words what I suspect the IfoA committee really wanted to say.
The actuaries letter was wimpish.
What it should have said was.
We deplore the PWC press release with its deliberately misleading figures.
Although the ft obtained a quote from one actuary saying the assumptions were extreme, we are disappointed that the ft nevertheless see fit to publish the essence of it with a ludicrously provocative title.
The facts are
Population mortality does not appear to be improving as fast as previously expected.
Mortality of better off individuals IS improving at roughly the expected rate.
Mortality of worse off individuals is improving at a significantly lower rate.
DB pension liabilities are very much weighted to the better off.
So EVEN IF the mortality change is not a blip, and we recognise the uncertainty, most of the DB liabilities seem likely to be UNAFFECTED by the population change.
Experience of individual pension schemes differ.
It has long been recognised that there is a significant difference between “Lives” and “amounts” mortality, i.e. People with higher pensions (or annuities) tend to have lower mortality) so it is dangerous to naively use lives experience for valuing pension liabilities. And very naive to use population experience.
It is particularly misleading to go on to assume such incorrectly derived lower mortality will continue in future and publish grossly misleading numbers.
It is not good enough to justify it in footnotes and to treat it simply as an arithmetical exercise.
At the very least it should be made clear that it is not what is expected and something like “best real world estimates” published at the same time. . And of course such real world best estimates need to be properly based on reality and proper analysis of the data.
Of course my correspondent was constrained ;- I recognise that there are rules governing how actuaries conduct themselves that prevent them from saying these things “out loud” – (the real world?).
Peter Tompkins argued “There is no purpose in turning this into an argument” but the cat was out the bag..
Here’s another private message
Hopefully not too many years until people feel able to make such statements publicly. Who knows, one of the retired old boys still might.
In the meantime, you are going to have to have your actuarial
argument -sorry “debate” on this blog, and as nobody reads the comments, here are the “real world” thoughts of a very angry Stuart Macdonald, (more please!)
I am sorry to hear that you found the simple and concise letter to the FT to be silly.
As you will be well aware, many of the signatories have both professional accountabilities and obligations to their employers, whose approval of public statements may be required. This can lead to more mitigated language than might otherwise be the case.
Perhaps you will find my personal response, sent on the day of the PWC press release, to be more to your taste.
Quite right! PWC ignored 200 year history of mortality improvement. May as well calculate pension deficit reduction if an asteroid hits UK. https://t.co/FAwxMIpEnC
— stuart mcdonald (@ActuaryByDay) May 4, 2017
Of course there is some healthy debate within the actuarial profession about likely future mortality. This is right and proper and to be encouraged. A consensus on something as uncertain as life expectancy, which will be influenced by unknown medical advances and social changes over the coming decades, would be foolish and, I’d argue, dangerous.
However, still more dangerous in my view is putting into the public domain, the idea that a 200 year history of mortality improvement has forever ended, life expectancies have peaked, and pension liabilities can be reduced by 15%. A statistical model used by expert practitioners to calculate uncertainty around life expectancy forecasts suggests that there is less than a 1% chance of the PWC scenario materialising.
Scheme trustees and senior executives at sponsoring employers, who may never have had to subject themselves to the detail of actuarial reports, had sight of these headlines. Indeed several of the signatories has already fielded questions from such individuals by the time the letter was submitted. Hence in my view it was right for members of the profession to respond quickly, in the same forum, using such language as all were able to sign up to, in order to mitigate the impact of the initial press statement.
PWC had every right to point out what the financial impact of no further increase in life expectancy might be. Just as Professor Aubrey de Grey has a right to speculate that we might live to be 1000. However, by presenting such a scenario as their updated forecast, rather than acknowldgeing that it is one possible but extreme outcome, they risked misleading people.
As you might encourage, my comments here are spontaneous, unchecked and made in a personal capacity. They are not the necessarily views of my employer, the actuarial profession or the other signatories to the “silly” letter.
If 750m people can collectively focus on the Eurovision Song Contest for 3 hours, I think that a few hundred can spend a few minutes (the morning after) thinking about what the Continuous Mortality Investigation is telling us about social equality, defined benefit schemes and indeed the way conventional and social media are interacting.
Jo Cumbo seems to have got some collateral damage from all parties, but she was the only person prepared to run this story. Not only did she run it, but she ran it without the help of the moaners who wrote the letter. My message to the signatories
You may call the debate unbalanced – but where were you?
Actuaries do not have a right to a hearing, PWC took an extreme position with CMI data and got the debate going, the letter did not incite further debate, it stifled it – until this blog asked what the letter was all about.
Let’s hope that the actuarial profession moves away from “mitigatory language” to using the “real world” language; away from professional disputes about the interpretation of data to a public debate on what is really going on with the CMI statistics.
As I said in my blog yesterday, now is the time for the actuarial profession to be making meaningful statements when people are actually listening. This data informs our thinking on DB plans, on social and residential care, on the state pension age and on the affordability of the triple lock.
The British electorate is waiting to hear from you, what are you saying?
White youth, black youth
Better find another solution
Why not phone up Robin Hood
And ask him for some wealth distribution
Joe Strummer – (White Man) in Hammersmith Palais
Jo Cumbo’s original article (loathe it or love it) is here; https://www.ft.com/content/f8a44b1a-33b8-11e7-bce4-9023f8c0fd2e
I’m pleased with my FT subscription which is value for money; you can buy here https://sub.ft.com/spa2_5/?ftcamp=subs/sem/allsub_psp/ppc/search/acquisition&utm_source=ppc&utm_medium=sem&utm_term=allsub_psp&utm_campaign=search&segid=0300566&utm_uk=WSMAAZ