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actuarial reports - what goes into the formulae

  • plumber
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18 Mar 08 #17163 by plumber
Topic started by plumber
Can anyone point me in the right direction as regards to the content of an actuarial report? I can't find the details anywhere. Is it a black art?

In particular, is personal health, ancestors longevity, lifestyle, job, taken into account or are we all lumped in the pot together under a broad heading?

  • Peter@BDM
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19 Mar 08 #17176 by Peter@BDM
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Blast, we are rumbled; yes, it is something of a black art!

Like many professional services you should get what you ask for, but that of course assumes that you know what you need – confused? You will be!

Actuaries (I am not one as it happens, I just work with them) are usually mathematicians, they are experts in probabilities. Using statistical information and mathematical techniques, they can for example calculate the average life expectancy of a large group of people.

In the divorce context, the work is mostly concerned with valuing pension. This is because pensions are a promise to make a payment (a pension income) at some point in the future. You ask a very important question about personal health etc. In large pension schemes, individual health and lifestyle are ignored, or rather that an average position is assumed. Work is a different issue, when calculating the pension liabilities of a pension scheme the scheme’s actuary will take into account the work done by the scheme members and how this will influence the probable mortality experience (average likelihood of dying at any given age). For example if most of the scheme members work on oilrigs, they will have a different average life expectancy than a group of call-centre operators. Individual health is not usually an issue but there are a few exceptional circumstances. For instance the scheme may have a facility for granting an ill-health early retirement pension, also many schemes require some evidence of health when someone first joins, although as joining the pension scheme often coincides with the start of the employment, the needs of both are dealt with at the same time. Health on joining the pension scheme is usually a matter of yes or no, specific adjustments are not usually made. Again, there can be exceptions, particularly if the scheme benefits include large death-in-service facilities (life insurance). Depending on the scheme and how many members it has, there may be a requirement for a more individual assessment if the life cover element becomes particularly large for any individual.

If all this has not yet made you nod off yet, and you are interested in how health – or more correctly, ill-health can be an issue when valuing pensions in divorce, have a look on our blog site at the article that one of my colleagues wrote www.ancillaryactuary.co.uk/home/2008/1/1...l-health-2-of-2.html.

If you are particularly masochistic and have further questions, please post again. I can promise to bore you and other visitors rigid on the whole subject.

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19 Mar 08 #17178 by Ephelia
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This link takes me to a page that says there's an error - I'm I doing something wrong?

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19 Mar 08 #17182 by Fiona
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Try clicking Pensions and Ill Health 2 on the left side of that page.

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19 Mar 08 #17183 by Peter@BDM
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Ephelia

Sorry about that, you are quite right and I don’t yet understand why the link won’t work.

Would you mind instead going direct to www.ancillaryactuary.co.uk and selecting the article(s) “Pensions and less than perfect health”, from the list of posts down the left-hand side?

Peter

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19 Mar 08 #17185 by Ephelia
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Thank you for this; I didn't realise health effected pension values. My Partner has a serious blood condition that statistically is likely to shorten his life (we like to live in a rose coloured world where it won't but...) He's been worrying about retirement (could retire in just over two years) now that the stbx has made it clear she wants most of the value of his house and half his pension - maybe this would help him keep a little more of his assets and be able to worry less.

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19 Mar 08 #17201 by plumber
Reply from plumber
Thanks Peter. I dont think I can digest all of that in my lunch break, so will need a little while before I come back with more questions.

Plumber

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