AAE publishes paper on the application of market consistency to pension funds in Europe

The Actuarial Association of Europe (“AAE”) has today published its discussion paper “Clarity before Solvency” on the application of market consistency to pension funds in Europe.

The purpose of this paper is to discuss from an independent, actuarial, point of view:

  • Some technical issues (e.g. the use of stochastic or deterministic methods, the discount rate, risk free rates, economic risk premium etc.) with regard to the application of a “market consistent” framework to occupational pensions and occupational pension institutions; and
  • Some of the broad issues currently being debated within the European pension environment and the social implications.

The AAE wants to highlight some important elements of the discussion on the quantitative elements of the IORP review. In doing this the AAE hopes to provide insights that can be used to bridge the different views that have been recently expressed within the broader debate. The discussion paper concentrates on a market consistent approach as the starting point.

When developing a financial framework for IORPs an important priority is to protect the interests of all stakeholders: scheme members, beneficiaries and sponsors.

The paper is intended for pension policymakers, supervisors, pension experts, actuaries, politicians and any other interested persons.

The full paper is available here.