So my iPad and I have made it through check in at Heathrow and I am sitting enjoying a glass of seasonal champagne, safe in the knowledge (read hope) that the plane will depart as planned and that tomorrow I will be spending Christmas with family in South Africa. Last year I wrote a red and green Christmas poem blog on Christmas eve while looking out of my office window over frosty fields in Hatton. This year my Christmas view will be somewhat different - very fitting for a year that has brought many changes. On the way to Heathrow, I was sitting opposite a Spanish couple who were obviously very concerned that they had got on the right train to take them to the terminal they needed. I speak no Spanish and they spoke no English so there was very little I could do to reassure them. As luck would have it, however, sitting between them was a seasoned Londoner who happened to speak Spanish and could direct them as to where they needed to go and where they should change (my lack of Spanish expertise means this is an assumption based on the pointing, nodding and smiling that went on) It struck me that this was one of the many ways in which the world illustrates on a daily basis that, when you need help, help will find you. For almost everyone I know, within the pensions industry and without, 2010 has been a year of growth, change and the kind of struggle that accompanies growth and change. Throughout, I have been constantly reminded of the fabulous-ness (this is a real word at Christmas) of the human spirit and pleasantly surprised at how many people are prepared to give of their time and effort to help. In the day of twitter, facebook, mallowstreet and linkedin, this is made easier as help is available from far and wide (rather than only from the Spanish speaker that happens to be sitting next to you on the tube) as illustrated by Mackenzie Nordal's blog from last year about how someone in New Zealand helped to fix her washing machine via an online forum. This seems a very fitting thought for this time of year and so I extend sincere thanks to everyone who has contributed to what has been both a difficult and fantastic year and to wish you all a very merry Christmas and all the help, happiness and health you need to make 2011 the best one yet!

As the nights draw in and the trains grind to a halt under 4 inches of snow, trustees may want to take a moment to reflect on the year that was.

2010 was a big year for the industry and hardly a week went by where pensions weren’t in the headlines. There isn’t space here to pick up all the year’s events but there are a number which stood out as having major implications for trustees during 2010 and into 2011.

On 28 January, Angela Eagle announced the government’s intention to bring forward legislation requiring pension schemes to equalise Guaranteed Minimum Pensions (GMP) benefits for males and females.  For most in the industry, GMP equalisation was seen as an unnecessary additional burden on already struggling schemes. 

Some argued that GMP equalisation is a straightforward exercise and ought not to incur significant additional costs but this is only true when the data is available and in a format which makes it possible to carry out the calculations. For many schemes, this data is not in electronic format, is incorrect or has been lost in the mists of time.

Data was a big issue as far back as February, when the Pensions Regulator issued a consultation paper regarding standards in record keeping. This theme continued with the implementation of targets for data accuracy by 2012 announced in June.

While the guidance and targets perhaps did not go far enough, having a clean, accurate and transportable data set is crucial to efficient administration and accurate valuation of a pension scheme and the fact that the regulator has put this high on the agenda is to be applauded. 

The time taken to review and correct scheme data ¬– often passed down through the years between different administration firms – should not be underestimated and trustees ought to be looking at obtaining a report on their data and getting the process underway early in the New Year if they haven’t already started.

By the time we reached the summer, changes to pension regulations and new regulator’s guidance were coming through at a gallop. 

In June, the regulator issued guidance stressing the importance of reviewing and monitoring the employer covenant. As anyone who read my last schemeXpert.com column will know, my feeling is that the employer covenant is one of the biggest risks posed to pension schemes and that this should, therefore, feature high on trustees’ agendas, forming the cornerstone for investment and funding decisions.

Perhaps the biggest announcement of the summer came in July, with the change from RPI to CPI as the measure for price inflation for the purposes of calculating statutory pre and post retirement pension increases.

There is still uncertainty over exactly how the legislation will be applied but the hope is that it will be applied across the board so that trustees are not stuck with the predicament of having to commission an extensive review of their rules and other scheme documents to determine the increases that ought to be paid.

Also in July, the regulator published revised guidance on enhanced transfer value (ETV) exercises and renewed their assertion that these exercises should be treated with caution by trustees. 

The most important point to take away from the guidance was that relating to member correspondence – it is crucial that the trustees review correspondence being sent to members as part of any such exercise and satisfy themselves that it is clear, accurate and is set out in a way that members will understand the choice that they are making.

A consultation document issued by the DWP at the end of July seemed to indicate that no transfers of GMPs or of post-1997 contracted-out rights will be permitted from DB pension schemes to either occupational DC pension schemes or to personal pensions from 6 April 2012. 

This had been expected to result in a flurry of ETV activity in the run up to 2012 however, illustrating the ever changing nature of the regulatory environment, the DWP announced at the end of November that transfers from contracted out DB schemes to non-contracted out schemes will be permitted after contracting-out on a DC basis is abolished.

Add to this the proposed changes to PPF levies, the end of A-day transitional arrangements and the revised Lifetime and Annual Allowances and 2011 is already shaping up to be a busy year. 

With all this activity, it is more important than ever that trustees, sponsoring employers and advisors communicate with each other to understand the specific impact of each change on their scheme and deal with it in a pragmatic and timely manner, appropriate to the circumstances of that particular scheme.

As we draw 2010 to a close, may I take this opportunity to applaud everyone in the industry – from employers and lay trustees, through to scheme actuaries, consultants and professional trustees for the innovation and dogged determination that has been shown in guiding schemes through what has undoubtedly been a challenging year.

The above is a copy of the text which appeared in my December column for www.schemexpert.com

I am making my way down to London for three days of meetings, conferences and talks. Usually, I would be laden down with laptops, files, notebooks and all the associated network leads and chargers but today I am experimenting and taking only my iPad. I have two presentations to give and have been keeping my fellow passengers amused (bemused) practicing talking through my slides. My ear phones are plugged in and I am listening to an albumn that I downloaded yesterday - I can't remember the last time I saw the inside of an actual music shop. I have red my emails, checked over a paper sent by a colleague, tweeted my dismal ranking in First Actuarial's Monkey League and am now seeing whether the touch screen keypad is up to the task of writing a blog - so far so good. The upshot of all of this technology is that time is never wasted. I can be on the train, in a park, in bed even and be fully connected to the world around me. A few years ago I would have baulked at the idea - no downtime ever! But that isn't the way it works, At any time, I can switch off my mifi dongle (thanks Jens!) and simply use it to read a book or listen to music. What it does mean, however, is that I can quickly and easily keep on top of things. No more coming back to the office after a few days and spending hours trawling through emails, they are already opened and either deleted, diverted or dealt with. No more cursing train delays - the time spent waiting around can now be spent doing something useful or catching up with the latest edition of the Times online. And the best part is that I can pop this in my briefcase when I get off the train and my shoulders won't be aching by the end of the day from lugging around all the aforementioned laptops, notebooks etc. Unfortunately, I still have my suitcase with three days' supply of clothes in it - roll on iShoes!

There has been a lot of talk in the press recently about the launch of the Times and Sunday Times' new website. More interactive features, more pictures, access to blogs and videos... but it's not going to be free. Now anyone who wants to view the new website will have to register for a free trial period and ultimately pay a subscription. 

I immediately signed up.

I had never before been interested in viewing newspapers online, preferring to settle down with my cup of coffee, breakfast and a real newspaper to leaf through.  But there was so much being written and said about this new website that I thought I'd sign up to the free trial period and see what all the fuss was about. I am now a fully fledged subscriber.

I can see why the Times has argued that people should pay for this online content.  It is just as valuable as the 'real thing' and is actually far superior: the videos and blogs really do add interest, it is easier to pick the articles you want to read - click on the heading, up they pop and you can close them down and go back to the main page or view related articles at the touch of a button. There is no clumsy folding of paper or having to find something to do with the sports pages because they're getting in the way of the travel section - the pictures are brighter, you can zoom in on the ones you are interested in and when the wind blows, my laptop withstands it much better than a hardcopy newspaper would.

Ultimately, the truth is that this is now the format in which I am most comfortable. Almost everything I do is done on a computer so it is unsurprising that I find this new virtual newspaper so much easier to navigate. It has become a two way experience - no more do I have to read each article in the order they were written or leaf through the pages to find one I'm interested in - within a couple of clicks I can sift through the whole of the content and select what I really want to read. The experience is somehow much more personalised and, perhaps most importantly, engaging.

'Engage' has become a bit of a buzzword in pensions over the last couple of years. How do we engage members of pension schemes to care about how they are invested, how to we engage trustees and encourage them to really get involved in their schemes, how do we present important information to members in a way that they will read it and understand it well enough to be able to make the right decision? The answer increasingly seems to be - put it online.

I can't help but think that when you give people choice over how and where they view something, enable them to delve more deeply into the things that are most important or interesting to them and easily navigate around the rest, you make them feel that the content is personal to them and it is therefore much easier to engage them.

The days when only 'techies' or kids used computers are gone - people buy their groceries and christmas shopping online, read their newspapers online, book their holidays online. Everyone is online and the pensions industry should be looking at how they can make the most of this valuable resource to get people interested in their pensions again.

My ‘economic indicators’ tell me that the recession is rapidly retreating. Nothing scientific, mind – this is purely based on events over the last week which seem to indicate an uptick in the economic situation:

 

Firstly, I cannot, for love or money, get a table in a restaurant. Our local country pub was packed to the rafters on Tuesday evening.  Now Tuesday wasn’t a particularly sunny day, in fact I recall it being pretty miserable – what are all these people doing in the pub on Tuesday, not only drinking but occupying every available table?! Everywhere I call for a Friday night table for two seems to be fully booked days in advance. It seems obvious to conclude from this that people are no longer conserving every last penny of disposable income.

 

My next observation was when a friend of mine’s mortgage application was delayed for three weeks as their bank are apparently unable to cope with the deluge of applications and ‘in principle’ offers that have to be formalised once supporting documentation has been sent in.  It sounds as though there are more people applying for mortgages, as well as more applications being accepted. Could it be that the banks are starting to lend more freely and that people are feeling sufficiently secure in their jobs that they are prepared to take on new mortgages? Or is this simply a temporary bubble caused by the increase in the stamp duty threshold for first time buyers?

 

I am attending the PP Awards ceremony tomorrow evening and, ignoring the fact that I have plenty of suitable dresses, I used this as an excuse to do a bit of shopping on Saturday.  Not only are the shops full of people but the streets are full of shops! Gone are the empty holes in the high street where Woolies used to be and the ‘closing down’ sales. Gone are the ‘buy one get three free’ signs, begging customers to enter the shop. Everyone seems to be buying things at the full price, paying the full rate of VAT.

 

I am no longer being sent emails from every shop or restaurant I have ever visited, trying to entice me in with one brilliant deal after another. It seems the crisis days in the retail and hospitality industries are behind us – could the property market be following suit?

 

It’s no scientific study or a judgement based on ONS figures or market data. And I wouldn’t like to guess which of the many alphabetical letters will be applied to the recession but, based on my experiences in the past week, I would say that things are looking up for the UK economy.

I am currently reclining on a clearly ergonomically designed French lounger sipping ever so slightly flat but nonetheless complimentary champagne.  Apart from having two hours to while away between now and my connecting flight to Johannesburg, the champagne is also in celebration of the completion of a task which seemed straightforward but turned into a monster .

This task was conceived between Christmas and New Year and has taken up most of my time ever since (As you can tell by the fact that my last blog post is coloured in red and green and makes reference to mince pies!)

Although there were times when I would have told you I rued the day when I decided to get involved in this seemingly never-ending project, the creation of our new website has taught me some valuable and surprising lessons about customer service and what it’s like to be a client in an industry you know nothing about – much like many pension scheme trustees I guess.  Hopefully this silver lining to the cloud that was our website build will enable me to give a better service to our clients, now that I have had some insight into what it is like on the other side of the service provider fence.

Lesson number 1: Jargon is incredibly frustrating

There is nothing worse than sitting around a table, talking about something that matters very much to you with people who are using language you don’t understand and expecting you to keep up.  ‘Bread crumbs’, ‘h2’ and ‘CMS’ mean nothing to me, in much the same way, I expect, that ‘PA00LC tables’, ‘longevity swaps’ and ‘IFRIC14’ mean nothing to most pension scheme trustees.

Lesson number 2:  An action plan is essential

And it’s not good enough just to have an end point ‘re-design website’ or, perhaps, ‘fully secure all members’ benefits’ are not much use without a clear plan as to how you are going to get there, who is going to do what in order to achieve the outcome you require, what timescales you are going to work towards and what risks there are that your objective won’t be achieved.  As with all things, this plan needs to be constantly reviewed and any changes communicated to all parties.

Lesson number 3: Advisors need to talk to each other

When you don’t fully understand the task at hand, you are at the mercy of your advisors to guide you through it.  Getting different answers from different advisors leaves you feeling helpless, lost and angry (depending on your temperament!) In order to give a good service to a client, you need to not only provide the advice you have been asked to provide but you need to provide it in the context of advice that the client may be getting from other parties.

Lesson number 4:  It is important to have a budget and to understand what factors might cause that to change

In the end, our website was developed for a fee which I feel represents good value.  It was not, however, completed for a fee which in any way resembled the original quote.  There are good reasons for this but I still felt that I had very little control over what extra work was done or how the work was carried out. 

From a client point of view, it is so important to have a clear idea of what is required in order for the work to stay within the original budget, what factors might cause this to change and to have confidence that the person charged with managing the project is working to keep fees to a minimum.

Lesson number 5: Clients have other things they need to do

Many pension scheme trustees are not professional trustees.  They have other, often very demanding, jobs which take up most of their time.  Asking them to spend a lot of time on something outside of that is a big ask – I know how frazzled I have become over the last two months and a website build is far less important and far more finite than the endless task of managing a pension scheme.

Advisors (myself included) tend to breeze in and suggest things like reviewing the investment strategy or revising the rules or taking a step back altogether and looking at what the end goal should be.

If, part way through the build, someone had said to me ‘Let’s take a step back and re-think this or that’, I would have punched them. I just wanted them to get on with it and get it finished.

While reviewing investment strategies and endgames is certainly a very necessary part of running a pension scheme, advisors need to be aware of the impact that undertaking these exercises will have on the trustees and company representatives and work to make the process as straightforward as possible.

I like to think that I was aware of these points before website-gate but you can rest assured that I will be especially aware of them when dealing with my clients in future - now that I know what it’s like to walk a mile in their shoes.

The good news is that the site is now up and, I think, looking great. Also, unlike my clients who have a far more long term task at hand, I can now turn my back on the website and get on with my day job..... well, sort of. I am actually en route to the International Actuaries’ Congress in Cape Town from where I will be blogging and tweeting about the latest developments in the international actuarial community (no jargon – promise!)

The deadlines met, the jobs all done

The blogs are written (bar this one)

 

The files are filed, reports issued

The once manic phone is now subdued

 

Baubles on windows and tinsel round screens

A quietly festive office scene

 

Outlook now sports an ‘out of office’ reply

Desktop papers swapped for a warm mince pie

 

As we hang up our ties and leave the fold

Of office warm for pavement cold

 

I wish you all a good helping of Christmas cheer

And all the very best in the coming New Year

I wrote this for a competition organised by the Actuarial Profession in advance of the Congress in 2010.  Thought it might work as a (rather long) blog post....

The year is 2019 and I am putting together the programme for the 2020 International Congress of Actuaries. 

 

The 2020 Congress is to be held in Iraq, which has gone from strength to strength as a tourist destination since the end of the war.  The religious tourists and pilgrims have now been joined by an influx of visitors from the West, attracted by the wealth of historic and archaeological sites, as well as the silks and antiques sold in the souqs and bazaars of Baghdad. 

 

It is this dramatic location which will form the backdrop for our conference and seems an appropriate setting for a Congress which will both recognise the historical roots of the profession and the ongoing change and transformation which we are living through. (Not to mention the excellent golf courses which have sprung up along the banks of the Tigris in recent years!)

 

I want the Congress programme to reflect the shape of the profession in 2020 and believe that what a profession looks like can be assessed by examining the environment in which members operate, the trends in each of the areas in which they work and new areas they are moving into.

 

The 2020 environment

 

Actuaries operate as part of the wider global world economy and therefore this has an impact on the work that they do.

 

In 2019 and moving into 2020, the global economy is once more enjoying a period of growth after the stresses and turmoil of the recession which ended during the early part of the decade.  Things do, however look somewhat different to the way they looked at the 2010 Cape Town Congress:

 

The increase in India and China’s internal consumption, along with improvements in their labour markets, resulted in a reduction in the availability of cheap exports in the early 2010’s, putting inflationary pressures on Western economies.

 

Inflation has, however, come back somewhat from the double digit levels it reached in 2011 as a result of this and the unravelling of quantitative easing policies which had been put in place to ease the recession.  This high inflationary period had a major effect on the work actuaries were doing, particularly in the areas of life and pensions.

 

The explosion of social media and online work has blurred geographic boundaries and there are more actuaries than ever getting involved in, and working on, projects outside of the country in which they live. 

 

The world is a smaller place than it was even five or ten years ago – information is available instantaneously and improvements in communication and technology mean that the actuarial profession is most definitely a globalised one.

 

There are still, however, some factors affecting actuarial work which vary enormously by geographical area – one such factor is mortality rates.

 

Mortality in 2020

 

The swine flu pandemic in the winter of 2009/2010 saw a large part of the world’s population affected by the virus.  Swine flu targeted mostly the young as well as pregnant women and the scale of the pandemic therefore served to change the shape of the mortality curve with much higher than expected death rates among the youngest in the population.

 

Although the flu pandemic was a catastrophic event which has a low probability of occurring again or having any lasting effect on the remaining population, another factor is further reducing the life expectancy of the younger population of Western countries:

 

Known as the McDonalds cohort, lives born between 1980 and 2010 are showing an increase in mortality rates as the effects of childhood obesity and continued poor adult nutrition take their toll.  There is still only a small amount of data on mortality rates as these lives are still relatively young, but the indication is certainly that they are subject to higher morbidity and mortality rates than those born in the preceding decades.

 

Whether these rates will continue to worsen at older ages compared with lives outside of the cohort, and whether this signals an end to the previous trend of steadily improving longevity in Western countries, is a matter which is guaranteed to generate lively debate at the conference – definitely one to add to my Congress programme!

 

Countries in Africa and Asia were less affected by the flu pandemic, and the McDonalds cohort does not apply to their populations to the same extent as it does in the West.  The main trend in these countries is adjusting mortality models for the major differences in mortality rates by social class and geographic location.

 

In developing nations, the difference in life expectancy between a highly educated person earning an above average wage and an uneducated manual worker can stretch to twenty years and beyond.  Vast differences in access to medical care, adequate nutrition, clean drinking water and the likelihood of contracting HIV Aids and other chronic diseases mean that mortality patterns vary significantly by geographical area and social class.

 

It will be interesting to hear Philamon Shapiwe, a young South African actuary who has carried out a recent mortality survey in Sub-Saharan Africa, conducting one of the plenary sessions on the way in which mortality models in developing countries take account of these differences.

 

While mortality rates affect actuaries working in a number of different fields, I recognise that it is necessary to have some breakout sessions as part of the Congress, to focus specifically on each key area in which actuaries work and the current trends affecting that particular discipline.

  

Investment

 

The behaviour of, and trends in, global investment markets will affect actuaries working in all areas, as well as those who specialise in investment.  I anticipate, therefore, that the breakout sessions dealing with investment will be well subscribed.

 

In fact, investment instruments are becoming more accessible to the population as a whole.  Take derivatives for example: once the preserve of the larger pension schemes and investment banks, they are now easily and instantaneously tradable by ordinary members of the public and certainly by the smaller institutional investor.

 

The markets have recognised the move away from large final salary pension schemes towards defined contribution funds, often controlled by the individual member.  There are therefore more products which focus on asset allocation solutions for these sorts of investors, where the ‘default’ fund is important and where financial sophistication is not always as high.

 

Many more actuaries are moving towards asset and risk management rather than focussing on liabilities, and there are more actuaries working in the area of investment than ever before.

 

In countries such as Uganda and the newly independent Republic .of Crimea, this is illustrated by the involvement of actuaries in helping to set up local mutual savings ‘clubs’ which are rivalling traditional banking institutions.  There may be lessons to be learnt for these clubs in looking at the experiences of Friendly Societies which were common in the UK at one time.

 

Elsewhere, actuaries have been instrumental in developing and pricing new investment instruments such as international mortality swaps and asset class swaps, where younger investors can gear up their exposure to long term growth assets and older investors can lock in returns.

 

Pensions

 

This is a practice area that was thought to be in decline ten years ago but which still attracts newly qualifying 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 has meant that this is no longer possible to the extent it was in the past and certainly 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 opportunities 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, now 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 the 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 which they would otherwise be entitled to.

 

Some areas are even starting to see the reintroduction of final salary schemes as a way of tackling 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 which protect the sponsor from unlimited risk, while still providing some level of risk pooling and security for pension scheme members.

 

General Insurance

 

A key trend affecting General and Life Insurance actuaries has been the implementation of Solvency II across the EU.  Solvency II aimed to ensure harmonised protection for consumers and sought to introduce a proportionate and principles based approach to risk management and capital allocation.  Roughly a decade on from its introduction, it will be interesting to look at whether these aims have been achieved and the effect that Solvency II has had on actuarial practice.

 

General Insurance actuaries have emerged from a difficult time in the insurance cycle during the early part of the 2010s and pricing margins are continuing to improve.  Consumers are still very price sensitive, however, with online price comparison sites continuing to thrive in the developed nations, as well as moving into developing countries.

 

Weather patterns across the globe have become more extreme and difficult to model.  Their effect on pricing policies and reserving requirements can be significant and one of the breakaway sessions will look at how extreme events can be incorporated into modelling techniques.

 

Another key trend has been the explosion in new areas of general insurance.  Technological innovations have meant that there are more products than ever before being developed to insure the range of electric cars and accessories, online businesses and ‘virtual’ products which have been introduced into the market.

 

Life Insurance

 

Apart from Solvency II, the key area that Life actuaries are talking about at the moment is the allowance for results of genetic testing when pricing policies.  The introduction of more widespread genetic testing has raised questions about how the results of these tests can be allowed for in the pricing of policies, if indeed they should be taken into account at all for ethical reasons.

 

Another fairly recent development for Life and General Insurance actuaries was the introduction in 2013 of the IFRS accounting standard which aimed to improve transparency and required that insurance contracts were valued at the amount an insurer would expect to pay to transfer its remaining rights and obligations to a market participant at the reporting date.

 

There were some contentious issues which had to be dealt with before the standard was adopted and a member of the International Accounting Standards Board has been invited to talk about the final standard, the effect it has had on insurance company business and whether it has achieved its aims.

 

Life actuaries are also looking at ways in which they can improve policyholders’ understanding of the products that they offer, as well as providing more accessible information about what products are suitable for individuals’ circumstances.  Policyholder communication is therefore high on the agenda and there has been a lot of time invested in improving online communication and providing online tools for consumers to manage their policies.

 

Non traditional

 

These specific breakaway sessions ought to cater for actuaries in the more traditional practice areas but one of the key trends in the last ten years has been the involvement of actuaries in new areas of work.

 

The actuarial profession in 2020 enjoys a much higher profile than at any other time in its history and actuaries are in demand in areas outside of their traditional roles.

 

Risk management and budgeting has been a key growth area following on from the losses of the recession at the end of the last decade.  Business and individuals are keen to assess and understand the nature of the risks that they face, as well as how to control them, and actuaries are particularly well placed to help them do this.

 

The general move from final salary pension provision to money purchase saving has meant that the demand for individual advice has grown.  Actuaries have been involved in developing this area and providing solutions in terms of retirement savings, investments and insurance which are suitable for the individual investor.

 

Actuaries are also involved in identifying potential future problems and developing products which address these issues.  One such area is long term care and the pricing and design of products which cope with the increased demand for, and cost of, care in old age.

 

The increased profile of the profession and actuaries’ financial acumen and risk awareness, has meant that, even in the more general business community, more and more Managing Directors and CEOs are actuaries.

 

An actuary who has moved away from traditional pensions work and who is now the CEO of a major multinational corporation is going to give the after dinner talk on his experiences in moving away from a traditionally ‘actuarial’ arena and into a more general business role.

 

Conclusion

 

Putting together the programme for the International 2020 Congress has been an exciting experience. It seems there is a wide range of issues which the profession is grappling with and it is heartening to see how well we are adapting to meet these new challenges.

It is difficult to imagine how the next ten years could bring as much change as we have seen since the 2010 Congress.  Having said that, the delegates at the 2010 Congress, which was held just as the world was emerging from the global recession, probably felt the same way.

One thing is certain, actuaries around the world have a unique ability to identify, understand and manage new trends. I am confident that the nature of change, and how well we can adapt to it, will be a theme for many future Congresses.

 

It was a Monday morning.  I had been to the gym before work and my aching arm was spooning oats into my mouth as I sat at my desk.

Chris walked in and said “Have you thought about the huge power the PPF will eventually have on investment markets?”

 

I hadn’t.

 

So he talked me through what he had been thinking about: As at 31 March 2009, the PPF had assets of £2.9bn, an increase of £1.5bn from a year ago.  During the year, the PPF oversaw schemes in the assessment period with combined assets of £5.9bn.

 

The likelihood is that these figures will continue to increase over time as more and more pension schemes enter the PPF.  It seems that the PPF will, in the not too distant future, become one of the most significant investors in the market.

 

Is it right that one organisation should have that much power? What if the PPF gets to a size where a change in their investment strategy could impact on the level of equity markets for example?

 

“It’s a good point”, I said, “you should blog about it.” 

 

Maybe one day he will discover the joys of blogging.  In the meantime, while we wait for that flock (or, as Chris would say, squadron) of pigs to take flight, I thought I would write this.

The recent recovery in equity markets seems to be a function of two factors:

First, the stress testing of banks and financial institutions in the US showed results which were ‘less bad’ than had been expected.  This lead to improved sentiment and the markets rallied as a result.

From July, this more positive mood in the market was joined by improvements in corporate earnings figures which produced a further upswing in equity markets.

While actual improvements in corporate earnings are certainly a more solid foundation for a recovery than market sentiment, the reason for these improvements ought to be taken into account when assessing the likely path that the recovery will take.

Rather than increases in revenue, many corporate earnings improvements have come about as a result of cost cutting measures.  This does not pose too much of an issue while costs are not rising.  If, however, you are on the side of the debate that sees high inflation rolling down the road towards us on lightly oiled roller-skates then the concern is that, unless revenues increase in line with costs, any hike in costs poses a grave threat to the health of these companies and to equity markets in general.