Actuaries through the ages – time for the next revolution?
September 19, 2013
I was chatting to some of our new graduate recruits and summer interns the other day and it dawned on me how much the actuarial profession and pensions world has changed since I started out in it many years ago.
Think about how actuarial valuations were once carried out. You would lay out a large piece of squared paper on your desk. Column by column you would then write out all the component steps required for the valuation of a single member: date of birth, gender, salary, service and so on. You would calculate items like age and accrued pension. You would then look up, in a hard copy book, the relevant projection and discount factors depending on the assumptions you were using, and put the whole calculation together. Remember as well that the member data was typically extracted from physical hand-written, and often dog-eared, data cards. Approximations were made to make the entire process viable.
Then came more sophisticated computerised spreadsheet programmes, and pensions administration, and the whole process was made dramatically quicker and more efficient. But in many cases the computers simply replicated, but faster, what the human calculators were previously doing, complete with hidden approximations and a “black box” approach.
That was a couple of decades ago. So why can it still take several months after an actuarial valuation date to deliver valuation results? Sponsors and trustees often have to wait days and weeks for the turnaround of sensitivities and what-if calculations. Given market movements, this means pensions information can be often out-of-date by the time it reaches the decision-makers. Opportunities may be missed and decision-making can be inefficient.
Here we are in 2013 and it’s as if someone pressed the pause button a couple of decades ago. It’s time to fast forward.
It seems the technology people use in their everyday lives is far outpacing the technology developments at work. We live in an age where people want and expect instant access to information at their fingertips wherever they are in the world. These advancements mean people expect the same instant access to information in their jobs. This is no different for those involved in making decisions about pensions. In a recent industry survey, over two-thirds of pension managers and trustees said they believe schemes have to wait too long / pay too much for actuarial calculations.
Our new Skyval platform has been purpose-built to respond to these challenges - using sophisticated technology and infrastructure to provide decision-makers with access to up-to-date pension scheme analytics.
The interest we have had from pension schemes and the rate they have been signing up to Skyval only reinforces our view that the industry is ready for this next revolution.
The question for all is who wants to be part of the inevitable revolution and who will ultimately get left behind?
If you’d like to find out more about Skyval, please click here.
Raj Mody is a partner and head of PwC’s pensions advisory team. You can contact Raj Mody on 020 7804 0953 or by email.