Defined Benefit Pension Plan Funding and the Role of Actuaries
The Pensions and Employee Benefits Committee of the International Actuarial Association created a working party to produce an educational monograph on the funding of DB plans and the role of actuaries. This paper looks at the funding of DB pension plans around the world, how they vary by plan design and regulatory structure and the role that actuaries play in the key issues and questions that arise around the funding of DB plans. The issues that are explored include:
- What is the purpose of funding?
- Is the funding objective clear and understood by all parties?
- Is the funding strategy consistent with the funding objective?
- How does the investment strategy interact with the funding strategy?
- How is the financial position of the pension plan expected to develop in the future?
- Are the actuarial assumptions reasonable and appropriate?
- Are the risks associated with the funding and investment strategies understood?
- What is the impact and likelihood of the continued support of the employer?
- What conflicts of interest exist?
- What information is provided to members?
These questions are informed and illustrated by examples and case studies from different countries around the world. The paper is aimed at a wide audience of readers (i.e. not just actuaries) who are interested in the funding of DB pension plans (including Governments and Regulators).
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Charles is the Chief Actuary at JLT Benefit Solutions. He is a pensions actuary with over twenty five years’ experience in the actuarial profession and he has acted as principal actuarial adviser to several multinational companies and their pension schemes. For the last twenty years Charles has been at the fore of thought leadership in the pensions actuarial world. He pioneered the use of modern corporate finance techniques in actuarial work and advised the trustees of the Boots pension scheme on their ground-breaking switch into a 100% bond investment strategy. Charles is a member of the Council of the Institute and Faculty of Actuaries and was Chairman of their Pensions Board from 2008 to 2010 and Chairman of their International Board from 2016 to 2017. He led the UK Actuarial Profession's research into the use of discount rates and was Chairman of the UK Actuarial Profession's Discount Rate Steering Committee. Charles is the UK’s pension representative at the IAA where he is Vice-Chairman of the Pensions and Employee Benefits Committee (PEBC) and he is also a member of the Executive Committee of the IAA. Charles chaired the PEBC working party which developed the paper on the funding of pension schemes in conjunction with the OECD and he presented it to the ICA last month in Berlin. Charles is a Fellow of the Institute of Actuaries. He has a BSc from Durham University and he is also a Chartered Mathematician, a Chartered Scientist and a Fellow of the Institute of Mathematics and its Applications. In 2013-14, Charles was Master of the Worshipful Company of Actuaries where his principal focus was the encouragement of charitable and education activities.