In a blog posted yesterday, Con Keating and Iain Clacher lamented the decline in the fortunes of DB pensions pointing to a series of political and regulatory interventions that hastened rather than prevented the catastrophic decline in good quality occupational schemes.
The article also pointed to a certain amount of actuarial chicanery that papered over the cracks for awhile without properly alerting sponsors to the massive increase in liabilities they were funding for , nor the loss of dividend income needed to meet pensions in payment.
The references to strip-off’s relate to the famous protest on Brighton beach by male pensioners at the time of the 2009 Labour Party Conference.
The article has prompted a number of interesting comments including this from a former colleague of the great proponent of equity backing for occupational pensions -Alastair Ross-Goobey
Although I found some parts of Gerardine’s post hard to follow, it’s central question is clear enough, where is the next big idea – what rabbit can the actuarial profession pull out of the bag now? The implication of a multi-sex nudist breach is a mass cross-gender protest at the decline in pay-outs as pensioners find the PPF their new paymaster.
I have been reproved for posting pictures of semi-naked men so you will forgive me if I restrict myself to this happy shot of Andrew Young’s family on Studland Bay yesterday! Andrew, you will remember, was author of the report that got us a safety net and his wife Sara, is COO of a pension scheme that is not stripping us of our pensions. As can be seen from the photos , you can enjoy a nudist beach with being stripped off.
On a more serious note, here is Con Keating’s answer to Gerardine’s question.
What’s the actuarial response to this? We have had none.
Cash flow projection forms the basis of much sound financial analysis. It was used, and unfortunately also abused in former times. The problem that remains though is comparison of distributions of cash flow projections over time.
Discounting the cash flows at some (any) common rate will return the correct proportionality but still needs some further metric to report that as a cash amount.
Part of the issue is the over-emphasis on solvency- (an intrinsically short term measure)
It is possible to compare distributions directly (for the technicians, by affine transformation) But there are other more important issues that need to be resolved -for example the completely misplaced emphasis from the Regulator on scheme funding as the solution to all ills. That is economically very inefficient and staggeringly costly to employers.
I also knew Alastair – we started our careers together at Kleinworts. His early death was a true tragedy.
Andrew Young is an actuary and has probably done more to stop the great pension strip-off in the UK than any other.
Who from his profession will step forward and provide pensioners with hope beyond the PPF? Or is the expectation of a PPF benefit, all that deferred members should give themselves?
We watch developments among the consolidators with interest.