Will the recent European Court of Justice (ECJ) ruling over gender-based pricing of insurance products result in a rebirth of Haruspicy? 

Pretty much since the Enlightenment we have got used to approaching the world in a logical fashion. The Oxford English Dictionary says that scientific method is: “a method of procedure that has characterised ….. science since the 17th century, consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses.”

Over time observations and measurements of life expectancy have been made, formulated  and tested and a hypothesis developed which says that women live longer than men.

Hypotheses tend to represent the generally accepted position. Hypotheses are subject to periodic retesting and where, after rigourous testing, a hypothesis appears to no longer adequately explain an observed phenomenon then it can be replaced by a new hypothesis which offers a better or more complete explanation. Whilst no hypothesis would ever be held to be an eternal truth, neither would it be discarded or ignored without a compelling rationale to do so.

The learned members of the ECJ, however,  appear to have overturned the current hypothesis on life expectancy, not because compelling statistical evidence has emerged which suggests the hypothesis is not valid, but on a whim because it is not “fair”, whatever that means, and objective justification no longer seems to be a defence.

So it looks like we will be faced with the outlawing of gender based pricing by the end of 2012, and I’ve been trying to think of alternative approaches which insurance companies could use to help them price their products, and I’ve come up with Haruspicy. Read more »

Posted in: Blog
Tags: Actuarial, Longevity, Mortality, Retirement

Apparently the Baiji (Yangtze River Dolphin) is amongst the rarest mammals in the world. It may even be extinct. Clearly there’s a fine line between being very, very rare (i.e. only one left) or being extinct (none left). The last definitive sighting was in 2004. It was declared functionally extinct in 2006 but video footage of what might have been a Baiji was taken in 2007 raising the possibility that there was at least one survivor out there, wisely staying well clear of humans.

When it comes to pensions legislation common sense is nearly as uncommon, but we appear to have a confirmed sighting in the DWP’s response to the consultation on the abolition of contracting out on a defined contribution basis.

Now I have never understood why one of Margaret Thatcher’s most lauded sound bites was “You turn if you want to. The lady’s not for turning!” Not turning in the face of irrefutable danger or logic is not a particularly common sense position to adopt. Indeed history and experience teach us that a U turn is not necessarily a wrong turn.

If only the Titanic had been able to perform a timely U turn. Or Thelma. Or Louise.

So clearly I welcome the Government’s common sense U turn on the abolition of transfers from contracted out pension schemes. I had blogged previously about the iniquities of the original provision, sneakily hidden in the regulations regarding the abolition of DC Contracting-out, which could have outlawed such transfers. Respondents to the DWP’s consultation on these Regulations presented a factual and rational analysis as to why, for some people, based on their particular circumstances, transferring out of a contracted out defined benefit scheme is clearly in their interests. A lesson that the Pensions Regulator could usefully learn.  More importantly the DWP appears to accept that the decision about whether or not to transfer should be made by the member, having taken impartial advice, rather than be imposed in some crass one size fits all, we know what’s best for you, diktat from the nanny state.

As I previously noted the draft regulations did rather smack of an admission that the FSA was failing in its duty to regulate this particular area of advice. Rather than address that shortcoming they have tried to foist the responsibility for regulation of transfers onto pension scheme trustees through the Pension Regulator’s “guidance” framework. Some commentators had responded to this development by suggesting that it was wrong and possibly illegal for trustees to fully embrace the Pensions Regulator’s guidance on enhanced transfer value exercises. Given this, abolition may have seemed like an easy option, despite its inherent unfairness.

Yes members need protection from unscrupulous advisers but that is why we have the FSA and, from 2013, the Consumer Protection and Markets Authority. It is certainly not why we have pension scheme trustees, who have a difficult enough job to do without being forced to do the regulators’ jobs for them.

We have consistently argued that properly structured and funded enhanced transfer value exercises are a legitimate approach for employers to engage with their scheme members with a view to managing their liabilities. They also provide members with an opportunity to properly review their retirement planning with a professional adviser.

So credit where credit’s due, well done to the DWP for changing its mind on this one. It will be interesting to see if the Pension Regulator’s finalised guidance on enhanced transfer exercises will also be leavened with common sense. 

Now if the DWP could only be persuaded to approach the question of GMPs in the same manner as it has recently dealt with Protected Rights – that is, just make them disappear – then that would be further evidence that, after years of languishing in neglect, common sense is unexpectedly back in vogue at Westminster.

Posted in: Blog
Tags: Contracting-out, Legislation, Politics, Regulation, Transfer Values

I’m thinking of founding Administrators Anonymous. A bit like Alcoholics Anonymous but for those trying to wean themselves off final salary pension schemes.

My Doctor did once ask me if I had a problem with alcohol but I explained to her that, on the contrary, I really quite liked it. However, I did come across an article about Alcoholics Anonymous the other day, as you do, which quoted the Serenity Prayer and was immediately struck by the latter’s applicability to pension scheme trustees.

For those of you not familiar with the prayer, they key part is reproduced below.

Grant me the serenity;
To accept the things I cannot change;
The courage, to change the things I can;
And the wisdom, to know the difference.

It seems to me that trustees and employers spend inordinate amounts of time and money on having actuaries and consultants run all sorts of models with all sorts of assumptions, fretting about risks over which they have no control. For example, neither trustees, employers nor their advisers have any real control over future investment returns, future inflation, future legislation, future life expectancy or the future security of sovereign debt. I’m not suggesting for one minute that trustees should blithely ignore these risks – clearly they need to assess and understand them – however, trustees seem to be less engaged with at least one serious risk over which they do have control and which they can change.

Data.

Trustees – serenity, acceptance, courage and wisdom are needed here and needed now! We’ve blogged on the consequences of poor data before, but to recap, without accurate data all the actual valuations and investment strategies you can think of are seriously flawed. Incorrect or missing data impacts on all key areas of scheme management. If your data is poor, that funding plan that you’ve agonised over with the employer isn’t worth the paper it’s written on.

So I’ve come up with a 12 step programme to help trustees cope with their data problems based on the principles that have helped alcoholics, gamblers and sex addicts successfully confront their various demons over the years.

DISCLAIMER No inferences about my personal proclivities should be drawn from the entirely random set of addictions noted in the previous sentence.

12 Step Programmes invariably invoke a higher power for assistance, which in this particular context, is clearly Spence & Partners. Bearing that in mind, the 12 Step Programme for trustees struggling with data demons would look something like this:

1. Admit to yourselves and Spence & Partners that you have a problem
2. Believe that Spence & Partners can restore your data to an acceptable level
3. Make a decision to turn your data over to Spence & Partners
4. Make a searching and fearless inventory of your data and its shortcomings
5. Admit to Spence & Partners, to yourselves, and to your current administrator the exact nature of your data problems.
6. Be entirely ready to have Spence & Partners remove all these defects in your data.
7. Humbly ask Spence & Partners to remove your data shortcomings.
8. Make a list of all members harmed by your incorrect data in the past and be willing to make amends to them all.
9. Make direct amends to such members wherever possible.
10. Continue to review and maintain your data and when you find it is wrong promptly admit it and correct it.
11. Through monitoring and review continue to improve your data, seeking guidance where necessary from Spence & Partners
12. Having realised as the result of these steps that your data was deficient in the past , tell others about the tremendous change worked by Spence & Partners on your data quality, and see what other areas Spence & Partners can help you in

As always with these self help programmes, Step 1 is the most difficult, but you will feel so much better about yourself for having taken it.

There is a serious point to this – there usually is to my ramblings but sometimes it is extremely well hidden. Trustees and administrators (and, whisper it quietly, despite the 12 Step Programme outlined above the latter doesn’t have to be Spence & Partners) need to engage and have an honest discussion about scheme data and how it can be improved. It’s no longer an option to sweep this under the carpet. For a more considered assessment of how trustees can really take control of their data and comply with the Pensions Regulator’s guidance in this area see our previous blogs on the matter or contact my colleague Mark Johnson or I to discuss our Pensions Data Service .

And finally, a couple of hydrogen atoms walk into a bar. The first says, “I think I’ve lost an electron.” The second says, “Are you sure?” The first says, “Yes, I’m positive…”

Posted in: Blog
Tags: Administration, Data, Pensions, Pensions Regulator, Trusteeship

 “We are discreet sheep; we wait to see how the drove is going, and then go with the drove.” So wrote Mark Twain.

This quote came back to me as a succession of lawyers responded to my request for advice for trustees on the impact of the ministerial “statement of intent”, as it is referred to by m’learned friends, made on 12 July 2010 this year. The statement  confirmed that the move to use CPI as the measure of price inflation applied to the private as well as the public sector and would take effect from 2011. As we have commented previously this has the potential to have a significant impact on schemes.

“Wait and see” seems to be the slightly ovine consensus view of the legal profession on the CPI/RPI question.

Now “wait and see” can be a completely valid response to certain situations and one can always point to situations where one or other of the protagonists would have benefited, with hindsight, from a “wait and see” approach. No one is going to dispute that Lord Cardigan, and indeed the whole Light Brigade, would have been better served had they waited to see whether or not they fully understood Lord Raglan’s order before commencing their magnificent but doomed assault on the Russian guns.   And clearly, the goalie in the attached video link should have waited to see where the ball eventually ended up before celebrating his tremendous “save”.  (It really is worth sticking with it, past the tacky Panasonic ad!)

But I’m left puzzled by what we are waiting to see as regards CPI/RPI – I fear it may be the Emperor’s new clothes.

Let’s focus on revaluation, the increases which are to apply to a members benefits between the date their pensionable service ends and their normal retirement date. To keep things simple let’s forget about contracting out and GMPs.

The factors used to revalue a members non-GMP benefits are set out in annual Occupational Pension (Revaluation) Orders (“Revaluation Orders”). These Revaluation Orders are made under Schedule 3 to the Pension Schemes Act 1993 (“the Act”). Paragraph 2 (4) of the Act states the following:

“The Secretary of State may estimate the percentage increase mentioned in sub-paragraph (3)(a) in such manner as he thinks fit.”

So it would appear that no primary legislation is necessary in order for the minister to use CPI for Revaluation Orders. In fact the minister would appear pretty much able to use whatever he likes. From what I have read there is no intention to apply CPI retrospectively, a concern expressed by some commentators.

The Revaluation Orders are published in mid-December each year and are applied for the following calendar year, So trustees, are required to use the factors derived from the Revaluation Order published in mid-December 2010 for deferred members retiring from 1 January 2011 onward.

Essentially all the annual December Revaluation Order does is apply an increase to the previously used factors. If the minister is true to his word, and I can think of no reason why he wouldn’t be, in December 2010 he will uprate the factors to be used for 2011 by CPI rather than RPI. I suppose there is a chance that he will not actually use CPI in December, but I think this is extremely unlikely, given that CPI will be used in the public sector and the unions, whilst not exactly welcoming the change, have used it to argue that public sector pensions are made more affordable.

So the question that trustees need answered is:

If the minister uses CPI to derive the uprated factors published in the December 2010 Revaluation Order, can I use these to revalue deferred pensions in my scheme?

Trustees do not need to wait until the Revaluation Order is published to see what the answer to this question is. Clearly the question posed above has only 2 possible answers “yes” or “no”. If the answer is “yes” then I believe the trustees can carry on as present and rely on the statutory orders – there has been no amendment to the scheme rules, or members benefits, nor is there any need for one.

If the answer is “no”, as it will be in some cases, such as those schemes which have hard coded RPI into the rules, then leaving this question until the Revaluation Order is published in December will leave very little time to decide what the trustees need to do if they can’t simply use the statutory order. Especially when you factor in Christmas and New Year holidays. They are going to have to know how they will administer their schemes from 1^st January 2011.  Trustees will either have to specify a scheme specific set of revaluation factors or, if possible, amend the scheme. There does seem to be an expectation, though I’m not sure how well founded it is, that the Government will announce some sort of overriding legislation to allow schemes that cannot automatically benefit from the announced change to implement it by means of some simplified approach. But this shouldn’t prevent trustees seeking to understand what their position is at this time.

I wouldn’t usually recommend trustees take advice from a mafia don, at least not unless they had duly appointed him under  Section 47 of the Pensions Act 1995, but I am reminded of John Gotti, the New York crime boss who quoted an old Italian proverb to the effect that “E’ meglio vivere un giorno da leone che cent’anni da pecora”, usually translated as, “It is better to live one day as a lion than a hundred years as a sheep”.

 Trustees, roar a little!  Ask your legal advisers the above question – and tell them you’d rather not “wait and see”.

Posted in: Blog
Tags: Administration, Regulation, Trusteeship

Trustees may soon get the chance to experience an aspect of the celebrity lifestyle enjoyed by the likes of  Robert Downey Jr, Paris Hilton and Kiefer Sutherland – by ending up in jail.

The Pensions Act 2004 did an excellent job of absolving pension scheme advisers of responsibility for most aspects of managing and operating a Final Salary pension scheme and placed that responsibility fairly and squarely on the shoulders, or any other exposed part, of the trustees.

Deciding what assumptions should be used to value your technical provisions? Why would you possibly make that the reponsibility of a highly qualified actuary who spends much of his working life focussed on precisely that issue when you can make it the reponsibility of the trustee instead?

Need transfer advice regulated? Why would you possibly make that the responsibility of the Financial Services Authority, when you can make it the responsibility of the trustee instead?

The old joke, which like many jokes was perceived to conceal a kernel of truth, was that as a trustee, you could be incompetent, as long as you were honest. 

How times have  changed! The list of legislative breaches for which trustees can be, at worst, fined or, at best, chastised for is lengthy, and, as the FT reports, lengthening.

The latest wizard idea out of Europe is to produce regulations which mean trustees could face unlimited fines or up to two years in prison for accidental breaches of rules aimed at preventing investment in the sponsoring employer. Now in reality the circumstances where this could come about are unlikely. But not impossible.

Thankfully the  Department for Work and Pensions said that it has been made clear that the Pensions Regulator will not pursue trustees for what are clearly inadvertent breaches. So that’s all right then. Though presumably its the Pensions Regulator who gets to decide whether the breach was inadvertent or not.

When you recall that legislation aimed at preventing terrorist atrocities on the streets of the UK has been used to  try to catch people leaving unwanted items outside charity shops, it does not inspire confidence that laws will not be misued.

As we have blogged previously it is difficult to understand why any lay person would put themselves forward to perform what is, increasingly, a thankless task which leaves people open to criticism from members, employers and regulators. Equally it is increasingly difficult to see that the Regulators expectations of trustees can be reasonably met by individuals who are trying to hold down their day job as well. I feel increasingly sorry for the many honest and dilligent trustees that I work with in terms of the breadth of knowledge and understanding they need to maintain to perform a role which they took on from the best of motives.

Clearly “professional trusteeship” is an idea whose time has come. However, as we have noted previously, there is currently no barrier to any Tom, Dick or Harry setting themselves up as a “Professional” trustee and holding themselves out as offering that service. Whilst final salary pension schemes have been regulated almost out of existsence, professional trusteeship is that rare thing in the modern world, a vitally important profession which would benefit from some more regulation of its practitioners.

Posted in: Blog
Tags: Pensions, Pensions Regulator, Professional Trustees, Trusteeship

The first time I saw Def Leppard the drummer still had both his arms.

Not many bands visited remote outposts like Belfast back in the early 80’s and we were mightily supportive and indeed grateful to those who did, like Def Leppard. The band had already released a couple of albums but this was the start of the tour to support Pyromania, the album that was to push them into stadia around the world and was a precursor to their absolutely mega-album Hysteria. They put on a great show that night and, indeed, as an ageing rocker, I can attest that they still do.

But, as with many bands, global success will alienate that small sub-group who only ever like a band if no one else has ever heard of them. You know what I mean – the guy or girl who goes “Yeah I saw them in a pub in 1980 when they couldn’t play their instruments and it was only me and my dog in the audience, and they were sohhh cool, but now, like, they’ve just totally sold out and are rubbish. I’m really into Ethel the Frog now”. Luckily for fickle fans everywhere Ethel the Frog were never a success. Not so lucky for Ethel the Frog.

The Governments proposals on the abolition of compulsory annuity purchase seems to be subject to some equally fickle fans, if a recent article in the FT is to be believed.
Read more »

Posted in: Blog
Tags: Annuities, Defined Contribution, Retirement

As those of you who know their French medieval history will recall, Arnaud Amalric was the Abbot of Citeaux at the time of the supression of the Cathar heresy in the Languedoc. The French Catholic king of the time, with the blessing of the Pope, had launched the Albigensian Crusade , aimed at exterminating the heretics. Because the Cathars had for many years lived happily amongst their Catholic neighbours, the crusaders were presented with a problem – how can we tell the “good” Catholics from the “bad” Cathars before we exterminate them?

This is where Arnaud comes in. Arnaud was what we would call in morden parlance, a pragmatist. He was with the crusaders beseiging Beziers, presumably to provide spiritual and moral guidance. Beziers had a mixed Cathar/Catholic population. When asked by his military colleagues for some guidance as to how they could distinguish the religious adherence of Beziers’ inhabitants in the forthcoming massacre and therefore avoid killing their “good” co-religionists, Arnaud came up with a splendidly pragmatic  response – “Kill them all, the Lord will recognise His own.”

Now don’t get me wrong, generally I see pragmatism as a virtue, but I’m not entirely convinced that, in this case, the end justified the means.

Equally, I am unconvinced that the effective banning of Contracted out DB to DC transfers hidden in the regulations regarding the abolition of DC Contracting-out is entirely justified.

The Government’s approach here seems akin to that of Arnaud. The proposed ban is clearly about a failure of regulation. There are many legitimate scenarios where transferring from a Contracted-out DB scheme to a DC arrangement of some sort makes sense for individuals, given their particular circumstances. Given this, and the fact the the Government will not have sat down with any individuals to ascertain what is or isn’t in their interests, killing all Contracted-out DB to DC transfers seems as overzealous now as Arnaud’s response all those years ago.

So rather than a medieval approach to the issue of transfers and regulatory concerns about protecting members from themselves, can we  have some proper regulation?

By this I emphatically don’t mean the recent consultation document issued by the Pensions Regulator on incentive exercises. It has always been my view that transfer advice is regulated by the FSA and trustees should not be forced to provide a figleaf for any regulatory failings in this area – see our other blogs on this point.

Having said that I think that the guidance around the trustees’ role in this area seems to have completely missed the point that trustees do indeed have a legitimate existing role in the process which could help resolve some of the concerns voiced. It is already the trustees responsibility to set scheme transfer values. The Regulator in its guidance in this area suggests that these can be a ‘best estimate’ of the value needed to replicate the benefits being given up by the member. So setting the transfer value basis for a Scheme rests squarely with the trustees.

If trustees and the Regulator have concerns about members losing out as a result of transfers, even where these are topped up to the full transfer value provided by the Scheme, or beyond, then clearly part of the problem must be the trustees’ transfer value basis.

In my opinion the biggest and best contribution trustees can make to the whole transfer value debate is to make sure that their transfer value basis genuinely reflects the value of members’ benefits.

Obviously this is yet another area where there is a potential for conflicts of interest - some trustees might be tempted to set weak transfer value bases with a view to facillitating positive communication in employer sponsored transfer exercises. A 20% “enhancement” to a weak scheme transfer value could well be less than 100% of a “fair” transfer value and mislead members into thinking that they are getting something “extra”. This is properly an area for scrutiny by the Pensions Regulator and another argument for the appointment of a professional trustee to any Scheme where potentially contentious issues are to be addressed.

This may raise the bar for transfer value exercises by increasing the amounts of any top ups required from the employer – but surely this is a good thing? Transfer exercises would then – quite rightly – be difficult to do “on the cheap” as disclosure requirements would mean that the full transfer value has to be disclosed to the member and any attempt to “incentivise” members’ to transfer out at a level below this would be very apparent to them.

I have to ask if this would not be a simpler and more joined-up solution than a blanket ban by stealth, which appears to be where we are heading?

Posted in: Blog
Tags: Actuarial, Enhanced Transfer Exercises, Financial Advisers, Pensions Regulator, Regulation, Transfer Incentives, Trusteeship

The Pensions Regulator has published clear guidance on record keeping and the steps that it expects trustees to take to ensure that their data is fit for purpose by the 31st December 2012. In a welcome reprieve for trustees, the end of the world is set for 21st December 2012.

Everybody knows that pension scheme data stored electronically, particularly historic data, is poor across the industry, but trustees have been reluctant to address the issue, possibly because they lack the tools to do so. Despite the recent regulatory guidance many still seem disengaged from the problem – but you never solve a problem by ignoring it.

The attitude of many trustees and administrators to this issue has led me to conclude that the only logical explanation for their inaction is that they are hoping that prophecies associated with the Mayan Long Count Calendar (“the Mayan calendar”) will render the issue redundant.

For those of you who are unaware, there are those amongst us (admittedly there is a question as to whether they should remain amongst us rather than be held in a secure facility where they can receive appropriate help) who believe that the Mayan calendar predicts that the Earth will end on 21st December 2012. The Mayans are no fools and accomplished remarkable feats in the written language, mathematics, astronomy, astrology, art, architecture, agriculture, and much more, so it’s likely they’ve got the end of the world right as well, runs the argument. Handily for trustees and administrators the end of the world will come 10 days before the Pension Regulator’s deadline for sorting out their data.

Unfortunately for trustees and administrators there are a number of problems with relying on the astrological predictions of an ancient civilisation that the world is about to end as a solution to their pension data issues.

• It probably doesn’t really satisfy their fiduciary responsibilities to members
• In an exclusive interview with the Daily Telegraph (seriously) a Mayan elder has made it clear that no such prophecies exist
• NASA has a special web page refuting the claims (seriously, again)
• The Pensions Regulator has made it clear that it will review progress in 2011 on the take-up of its guidance and its effectiveness in addressing problems identified in its earlier consultation. So on the off chance that the world does end in December 2012, it may not save trustees from regulatory scrutiny.

Whatever way you look at it, trustees are going to have to deal with their data issues, and the sooner, the better – but it doesn’t have to be the end of the world.

For our take on how to beat the 2012 deadline click here

For an alternate view of how John Cusack might handle things click here – 2012 The Movie

Posted in: Blog
Tags: Actuarial, Administration, Data, Pensions, Pensions Regulator, Trusteeship

Thomas Aquinas apparently spent a large part of his life pondering the number of angels that could dance on the point of a needle. He also , apparently, could gravely debate whether Christ was or was not a hermaphrodite and, most crucially of all, whether or not there are excrements in Paradise.

Speaking of interesting digressions, this brings me to actuarial mortality assumptions and, in particular, the question of the most appropriate mortality assumptions to use for a particular valuation for a particular scheme.

I always think the key thing to bear in mind is that whatever assumption is chosen it will be wrong.

For example, I suspect any of the tables currently in use ignore the impact on mortality of future trends of Global Warming (or more likely Global Cooling, at least in the short term, as we appear to be 10 years into a cooling trend, although as with all statistics it depends on your starting point). Actually, Global Cooling is potentially a greater risk to humanity than Global Warming as a few degrees of Global Warming are projected to result in a net increase in food production (statistically at least, which I find tends to be shorthand for “not much better than guessing wildly”), whereas Global Cooling much more quickly results in a net reduction in food productivity, with dire consequences for the teeming millions.

But hey, the polar bears will be all right, which is the main thing, I guess.

Obviously if warming were to continue beyond a few degrees this would start to have a negative impact on food production also. And result in malaria in Notting Hill – such a development would be of great help to many final salary pension schemes. However, given the recent lessons of SARS, Avian Flu and Swine Flu, such schemes probably can’t rely on a Global pandemic to solve their mortality problems.

The good news is that,  in the long run, Malthus may eventually be proved correct. Studies of animal populations that grow at a rate greater than the potential food supply generally see catastrophic reductions over a very short period. Eventually.

And have the actuaries considered the risk of a meteorite strike? A direct hit in the greater London area would do wonders for the BT Scheme’s deficit. Just in case you think I’m being facetious, which of course I am, below is a summary of a news story that reports that such a strike is probable, statistically speaking. Eventually.

The story reported that a 13 year old whizkid from Germany corrected NASA scientists on the probability of a asteroid called Apophis striking earth. While NASA scientists took the probability calculations (which are far from easy) and estimated that there was a 1 in 45,000 chance of strike; the boy’s findings showed the chances to be 1 in 450. NASA scientists concluded that he was actually right since they had not considered the possibility of the asteroid striking with satellites , something that the 13 year old did.

Slightly disappointingly, NASA subsequently refuted this element of the story and claimed it had faith in its original calculations.

However, both NASA and the 13 year old agree that if the asteroid does collide with Earth, the resultant shockwaves would create huge tsunami waves, destroying both coastlines and inland areas, while creating a thick cloud of dust that would darken the skies indefinitely.

So what have we learned from our digressions  into climatology, demography and astronomy?

Well firstly, even 1 in 45,000 isn’t  a particularly comforting probability when it comes to possible armageddon and the extinction of human life. By some estimates the mass of the earth increases by about 40,000 tonnes a year due to extraterrestrial bits and pieces striking it. These are obviously pretty small meteorites, but conversely that’s an awful lot of actual collisions. It only needs one big one, and if it comes, Bruce Willis and Billy Bob Thornton probably aren’t going to be able to help.

Secondly, sometimes it’s worth getting an alternative view, but not necessarily from a 13 year old. Notwithstanding the uncertainty attaching to climate change and meteors, it’s important for trustees and employers to understand, as far as is possible, the latest thinking on mortality and how it is likely to develop in future.

Thirdly, it should be apparent from the above that the uncertainty inherent in final salary schemes poses real risks for many businesses. Also whilst attention to detail is important you shouldn’t lose sight of the big picture. The good news is that you can be pro-active in taking steps to manage and reduce the risks.

And finally, whilst I haven’t specifically quantified the direct effect of such a meteor impact on rates of mortality, I presume you can draw your own conclusions.

Posted in: Blog
Tags: Actuarial, Liability Reshaping, Longevity, Mortality, Pension deficits, Pensions End Game