The Demography Committee has prepared a report and recommendations following a review of the mortality assumptions used in converting a retirement fund into an annuity as prescribed in the following Actuarial Standards of Practice:
- Actuarial Standard of Practice ASP LA-8 “Life Assurance Product Information”;
- Actuarial Standard of Practice ASP PEN-12 “Statements of Reasonable Projection – Occupational Pension Scheme and Trust RACs”; and
- Actuarial Standard of Practice ASP PRSA-2 “Personal Retirement Savings Accounts Product Information”.
This report is available below.
Council is in favour of updating the mortality assumptions in the above ASPs in accordance with the recommendations in the report. The proposed changes will be issued for member consultation shortly.
Two-dimensional table of future mortality improvement rates
IT systems limitations faced by some users of the above ASPs complicate the conversion of an illustrative retirement fund into an annuity, where the calculations involve applying two-dimensional (year- and age-specific) mortality improvement factors to a base mortality table.
To address this, the Demography Committee has developed a set of one-dimensional factors to allow for future rates of mortality improvement. These one-dimensional factors have been derived with the aim of providing a proxy method that produces results which are a reasonable fit to the recommended basis outlined in the report.
However, Council has endorsed the Committee’s recommendation that the proxy adjustments should be eliminated and a two-dimensional mortality basis should be adopted in two to three years, following the next review of the mortality assumptions.