By Penny Bailey
Since spring is suddenly here (or arguably almost summer), it reminds me of how quickly time is passing. Maybe it’s the fact that the winter here in the Midwest was so mild that makes it seem as if everything is running together, but I’m pretty sure I’ve felt this way regardless of the amount of snow and frigid days between the falling of the leaves and their return. I haven’t spoken to anyone in recent months that hasn’t complained about not having enough time.
As we think about time passing so quickly, it can be a reminder of our mortality. Who better than actuaries to reflect on mortality and the impact that it has on our work? It comes into play in so much of what we do as pension practitioners—the calculation of our liabilities, the value of the lump sums payable to participants and the need for greater understanding of lifetime income requirements.
The Pension Section Council has several projects underway that are steeped in mortality and longevity issues. Hopefully many of you were able to listen to the May 16 webcast “Building a Framework for Measuring Retirement Income Adequacy.” During the webcast, we explored the SOA research paper “Moving Beyond the Limitations of Traditional Replacement Rates.” In this paper, the researcher finds that conventional replacement rate targets are not adequate in their traditional role as a tool for retirement planning or evaluating retirement preparedness due to the limitations outlined in the paper. If you did not get a chance to listen to the webcast, I encourage you to check out the paper on soa.org.
Another webcast on mortality issues was also just completed. As I hope most of you are aware, the SOA recently released a new interim mortality improvement scale—Scale BB. Please refer to the article in this edition of Pension Section News for a detailed discussion. The June 6 webcast sponsored by the Pension Section provided an introduction to the new scale along with an overview of new techniques being used in the analysis of mortality improvement trends. As actuaries, there is an expectation that we are well-versed in mortality issues and this was a great opportunity to ensure you are educated in the latest thinking (a recording can be ordered from the SOA if you were not able to attend the live event).
The Pension Section Council recognized that there is a wealth of information on mortality, but it is sometimes difficult to find the data. As such, a group was formed to help organize the mortality information on SOA.org. If you visit the Pension Section Council mortality resource webpage, you’ll find extensive information on mortality topics organized in easy to navigate sections including tables, standards of practice, surveys and introductory articles, mortality models, mortality and socioeconomic status, p-splines/smoothing, mortality and longevity risk, and relevant SOA sessions. For example, an article from Benefits Canada entitled “An Age Old Story (Longevity Risk)” discusses quantifying longevity risk along with strategies for mitigating that risk in pension plans. It would be a worthwhile use of CE time to explore the resource webpage and expand your actuarial horizons.
We are also looking for opportunities to partner with the American Academy of Actuaries on its initiative on lifetime income. The Academy has a taskforce jointly sponsored by Life and Pension Practice Councils trying to encourage lifetime retirement savings through different approaches. The council, through the Committee on Post-Retirement Needs and Risk, is considering research to support this effort including a potential project to determine how and why people make decisions to take annuities or not and a review of the barriers to offering lifetime income options in DC plans. You can certainly expect to see more information on this topic in the future.
We all know that there is lack of understanding among non-actuaries about what actuaries do. However, I doubt very many people who have been in the profession for any length of time haven’t heard the question “how long am I going to live?” in response to telling someone that they are an actuary. At the root of what most actuaries do, and especially pension actuaries, are mortality and longevity issues. The council is excited to be a part of education and research on this very important topic.
Penny A. Bailey, FSA, MAAA, EA is chairperson of the Pension Section Council for 2012. She is a partner with Mercer in St. Louis, Miss. She can be reached at penny.bailey@mercer.com.