The UK defined benefit pension scheme landscape has changed dramatically over the last few decades. During this period of change, conflicting views regarding the measurement of both assets and liabilities has made communication challenging. In turn, this has led to an under appreciation of risk and often suboptimal decision making. This paper seeks to draw together a variety of contrasting views to provide a coherent framework for stakeholders to meet pension scheme obligations over time.

The proposed framework encourages agreement between both scheme sponsors and trustees towards a common target through a well articulated plan or “flight path”. In addition, the proposed flight path structure provides a common basis underpinning the measurement of both pension obligations and the risks inherent in any plan to meet those obligations.

This abstract relates to the following paper:

HatchettJ., HurdM. and ClacherI.Meeting defined benefit pension obligations: measurement, risk and flight paths ‐ Abstract of the Edinburgh discussionBritish Actuarial Journal, doi:10.1017/S1357321712000335

The Consumer Information Working Party has published this paper which explores how we can better engage consumers with long-term savings and investments. The working party considered the current state of consumer information, which is a long way from ideal, including: consumer insights and touch points, the current consumer information model, relevant considerations from behavioural economics, examples of information failures and some successes from other fields. They then propose a way to deliver more effective information, including a possible framework and some ideas for its application. They finish with proposals for immediate next steps and urge the Actuarial Profession to take a lead in this area.

In this paper we examine two aspects of extreme events: their calculation and their communication. In relation to calculation, there are two types of extreme events that are considered.

The first is the extent to which extreme events in two or more variables occur together. This can be gauged by using measures of tail association. Higher levels of tail association are useful for highlighting the extent to which there are concentrations of risk. We investigate the range of approaches used to measure tail association and propose a pragmatic alternative, the coefficient of finite tail dependence.

The second type of extreme event arises from combinations of losses from a series of risks that together result in total losses exceeding a particular level. This is measured using ruin lines or, in higher dimensions, planes and hyperplanes. The probability of ruin and the economic cost of ruin are considered here. In this context, it is important to consider what the term “loss” actually means, and whether it is in relation to a current set of exposures or a potential strategy.

The communication of extreme events is discussed not just in terms of the numbers that can be used, but in terms of the graphical methods that can be used to aggregate information on a range of risk combinations. This involves communicating not just the level of risk but also the importance of the risk considered.

This abstract relates to the following paper:

HatchettJ., HurdM. and ClacherI.Meeting defined benefit pension obligations: measurement, risk and flight paths ‐ Abstract of the London discussionBritish Actuarial Journal, doi:10.1017/S1357321712000335

This abstract relates to the following paper:

SweetingP. and FotiouF.Calculating and communicating tail association and the risk of extreme loss ‐ Abstract of the London DiscussionBritish Actuarial Journal, doi:10.1017/S1357321712000347

The UK Pension Protection Fund (PPF) was established in April 2005 to protect the pensions of members of UK private sector defined benefit pension schemes which have insufficient assets and whose corporate sponsor fails. The Fund takes over the pension scheme assets and assumes responsibility for the payment of compensation to the former members of the scheme. The PPF is funded by a levy on the population of eligible schemes. This paper discusses the application of Enterprise Risk Management principles and techniques to the unique situation of the PPF. The elements of the financial management of the Fund have been developed by reference to practice within proprietary insurance institutions and within pension funds. The paper will be of interest and, we hope, of some value to students, researchers and analysts and also to the PPF's own stakeholder groups that have a stake in an effective pension protection regime.

The UK has seen a significant transition from Defined Benefit (“DB”) to Defined Contribution (“DC”) for occupational pension saving. The planned automatic enrolment program starting in 2012 is expected to increase the use of DC. The main features of DC are that investment risk falls onto the individual during the pre-retirement phase and that there are no guarantees as to investment returns or the level of pension. In July 2012, Steve Webb, the Pensions Minister, challenged industry to think hard about meeting the need for more certainty about pension savings in DC plans and to consider providing an affordable ‘Money Safe’ guarantee where the member would get back at least the nominal value of their contributions (individual, employer and tax relief). This paper explores whether this is viable for the mass market.

Risk terminology varies from organisation to organisation, and actuaries working in different organisations may use different terms to refer to the same risk, or use the same nomenclature for completely different risks. This paper sets out a classification system developed by the Risk Classification Working Party for the Profession that can be used as a common reference point for discussing risk. Actuaries will not be required to use this system, but it is hoped that common terminology will reduce the possibility of confusion in discussing risks.

This abstract relates to the following paper:

EasonS., BarkerP., ForoughiG., HarsantJ., HunterD., JarvisS., JonesG., KnavaV., MurphyP., MurrayK., MuthulingamJ., OdoziN., PageT., WashomaK. & WebbA.Report of the Investment Products for Retirement Savings Working Party: “Is there a place in the UK Defined Contribution pensions market for a guaranteed savings product?” ‐ Abstract of the London discussionBritish Actuarial Journal, doi:10.1017/S135732171300024X

This abstract relates to the following paper:

KelliherP.O.J., WilmotD., VijJ. and KlumpesP.J.M.A common risk classification system for the Actuarial Profession ‐ Abstract of the London discussionBritish Actuarial Journal, doi:10.1017/S1357321712000293