Sunday, December 15, 2013

Defined Benefit Valuations: Hilary Salt from First Actuarial - TUC Pension Trustee Conference 2013

The 2nd speaker on the TUC "Defined Benefit valuations" session after Con Keating was Hilary Salt, from First Actuarial.

Hilary asked what was the purpose of a pension scheme? Answer: to pay the right amount of money at the right time.

Assets are needed to make sure that the right amount of money is available to pay the pensions as they are needed. Other issues such as
Liability-driven investments (LDI) have no impact on the amount of pension and are a distraction.

The argument that you need assets to pay for the last man (or women) still in the scheme is self defeating.

You should focus on future income streams. Valuations should be periodic checks but you need to play the ball from where it is and look forward, not look back.

Valuations are used for the wrong things. Expensive "Buy outs" by of schemes by insurance companies are irrelevant since the Pension Protection Fund (PPF). 

Accounting valuation funding is too short term, buy outs are irrelevant, "Flight plans" or "Glide paths" just move assets into bonds to reduce risk and import the inefficiencies of Defined Contribution (DC) schemes into DB.

Hilary had a Q&A after the presentation with Con chaired by Nicola Smith from the TUC. I asked them the question "What should we DB pension trustees should do next about the "scare mongering" about deficits that we have heard about".

Con said we should be prepared to challenge our actuaries. They do not use true and fair value. While Hilary said we must be ready to challenge the Regulator over valuations.  It can't be right that its okay if the reason that no one loses a pension is because they never had the chance to have a pension in the first place.  (Think about this)

Usual health warning that my hurried notes on these presentations on my Blackberry may not be an verbatim acount.

PS It was good to see Jimmy Nolan, former trade union trustee from the Liverpool Docks pension scheme at the conference ask a question. For as long as I have been going to TUC pension conferences, Jimmy has always been there. 

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