Actuaries are often consulted (as experts) to select, recommend or evaluate investment return assumptions for pension valuations. While certain ASOPs provide broad guidance for reasonable assumptions, having a detailed and robust process for developing each significant pension assumption (including the investment return assumption) provides our principals and other intended users with a more grounded professional opinion and enhances the actuarial integrity of valuation results. A robust process includes consideration of the input perspective and sources of professional forecasts for inflation and returns by asset class. Professional investment forecasters apply specific methods that are beyond the expertise of most actuaries. A robust process also includes the selection of an appropriate forecast horizon, the impact of asset allocation and benefit cash flow, reasonable ranges and frequency of changes in return assumptions. The presenters will address these topics and provide case study results to illustrate the process.
