Developing a framework for the use of discount rates in actuarial work

Document description

The Management Board of the UK Actuarial Profession is undertaking a thought leadership cross-practice research project on the use of discount rates by UK actuaries.  The timing for this research is particularly appropriate as there is a convergence of interest in discount rates from within and outside of the Profession.  Discount rates are at the heart of most actuarial calculations and are of significant public interest.  As part of this project, the Management Board wants a full and open debate on the significant issues and this paper is the next step in stimulating that debate, giving another opportunity to influence the future direction of the project.  This paper has been developed by the cross-practice discount rate steering committee, which is making a number of recommendations to the Profession which are intended to help actuaries to speak clearly and with authority in future debates about discount rates and to support actuaries in communicating impartially and effectively.  As part of further developing the recommendations to the Profession, the steering committee is seeking views from stakeholders from inside and outside of the Profession.  The steering committee is commited to seeking feedback on the recommendations and hopes this paper will give those inside and outside the Profession an opportunity to add to the dialogue so that as wide a range or potential views as possible is heard.

In this paper, the steering committee has concentrated on the more technical aspects of developing a framework for communicating discount rates and associated risks and the report is aimed primarily at actuaries.  But the committee is mindful of the need to help actuaries to communicate more clearly with those outside the Profession.  During the first half of 2011, the steering committee will therefore concentrate on producing a document in less technical language to help non-actuaries to understand the issues around the selection and use of discount rates and to help actuaries in their communication with stakeholders.