Commissioned project - This research project covered three areas; a survey of current practices, a survey of existing research and debate, and the developing of a common language for communicating current practice on discount rates and risk

Survey of current practice

A survey of the different discount rates that are currently used for different purposes in each practice area in the UK, including: 

  • How these rates might have been constructed/determined/chosen
  • The historical perspective
  • The legislative framework
  • The nature of the promises made
  • The impact of government legislation in changing the nature of some promises over time (e.g. increasing the guarantees and reducing discretion). 

Particular attention was paid to understanding who the liabilities are in respect of, what they need them to show, the extent to which risk is included in the discount rates, and how that has influenced the discount rates used historically including:

  • Shareholders
  • Policyholders
  • Management
  • Regulators
  • Trustees
  • Pension scheme members

The international arena should be considered where it seems to have a particular bearing on the position in the UK but a full survey of international practices is not proposed.

Survey of existing research and debate

A summary of the existing research on the subject of discount rates and a synthesis of the arguments, including a survey of any recent public debate on the subject.

The research will need to consider future developments in discount rates that are already underway (e.g. international accounting standards, Solvency II) including key dates.

Developing a common language for communicating current practice on discount rates and risk

Developing a common language to describe current practices and the rationale behind different discount rates, and improve the communication of discount rates, particularly to users of actuarial services and relevant external stakeholders.

To describe why and how risk is included in discount rates in different circumstances and the rationale behind similarities and differences. 

Related documents

Contact Details

For more information please contact

research@actuaries.org.uk

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Start date
E.g., 25/11/2020
End date
E.g., 25/11/2020

Events calendar

  • Spaces available

    The webinar will discuss the challenges and opportunities schemes face in evaluating end game options, choosing a target state and understanding the impact this strategic decision could have on member outcomes long after the “end state” is reached. Adolfo, Kevin and Rhian bring over 60 years of experience in the industry and a variety of perspectives as scheme actuary, covenant adviser, trustee, de-risking adviser and insurer.

  • Spaces available

    Retail banking is going through a period of substantial change as it moves into the digital age. Banks have large amounts of data about their customers and about their risks. Open data application programming interface (APIs) and data science are enabling banks to use their data to offer innovative and sometimes personalised services. Data science is also adding value in risk areas such as fraud detection and cyber security. At the same time, the move to online banking is making it easier for firms including fintechs to enter banking without having to establish branch networks.

  • UK Town Hall 08:30-09:30

    Webinar
    4 December 2020

    Spaces available

    IFoA President Tan Suee Chieh would like to invite you to the Institute and Faculty of Actuaries’ (IFoA) virtual UK Town Hall 2020, hosted by Tan Suee Chieh with IFoA’s Immediate Past President, John Taylor, President Elect, Louise Pryor and IFoA Chief Executive, Stephen Mann.  

  • UK Town Hall 10:00-11:00

    Webinar
    4 December 2020

    Spaces available

    IFoA President Tan Suee Chieh would like to invite you to the Institute and Faculty of Actuaries’ (IFoA) virtual UK Town Hall 2020, hosted by Tan Suee Chieh with IFoA’s Immediate Past President, John Taylor, President Elect, Louise Pryor and IFoA Chief Executive, Stephen Mann.  

  • Spaces available

    Cash-flow driven investing is a game-changer for DB pension funds navigating their end-game. Suitable for sponsors who want to reduce risks on their balance sheets. And for trustees, it shifts the focus to providing greater certainty of returns, managing funding level volatility and ensuring they have enough income to pay cash-flow requirements.

  • Spaces available

    Patrick Kennedy, Partner at Gateley Legal and Founding Director of Entrust (a leading professional pensions trustee company), will be delivering an update on the latest legal developments during the course of 2020. With both a pensions legal perspective and over 25 years of trustee service, Patrick will seek to highlight how the letter of the law has continued to evolve against the backdrop of a difficult and challenging year

  • Spaces available

    The talk will provide an understanding of the priorities and relationships between deficit reduction contributions, in the context of wider scheme funding, and different types of value outflow from the employer based on the working party’s recently published report. 

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    Running off the £2 trillion of UK corporate sector defined benefit liabilities in an efficient and effective fashion is the biggest challenge facing the UK pensions industry. Trustees and sponsors overseeing those schemes need to be clear on their target end-state and the associated journey plan – but too few have well articulated and robust plans.

  • Spaces available

    The actuarial skill set has much to offer the banking industry. So many of the skills that actuaries acquire during their working life translate across to the world of banking and yet banking is perceived as an alien environment to many actuaries. But is it?

  • Spaces available

    Covid-19 has required an urgent and cross-practice initiative to facilitate the extensive impact this pandemic has across all industries. IFoA members have been keen to contribute in a different way, so we developed the IFoA Covid-19 Action Taskforce [ICAT] to coordinate our effort, with a more efficient governance.

    We have over 500 volunteers and countless topics which we have amalgamated into 93 workstreams.