Actuarial calculations and reviews provide information that is often viewed as very crucial for risk management and governance of pension funds. As such, among other things, pension fund managers and/or trustees customarily use actuarial calculations and reviews in making funding and investment decisions and in assessing risk exposures. Therefore, calculations and reviews play a significant role in the operation and, ordinarily, in the supervision of pension funds.
This synthesis paper is an abridged version of the background paper published as IOPS Working Paper No. 24. It briefly describes calculations and reviews, the role of the actuary as well as other different professionals undertaking these calculations. It then discusses the role that calculations and reviews can play in pension supervision, and concludes by outlining the challenges (and potential solutions) for supervisors using actuarial calculations.
The main finding of the paper is that actuarial calculations and reviews have a crucial role in the oversight function, especially when considering the supervision of DB and hybrid pension funds. Their primary function, in the pension supervision process of such funds, is to ensure that the entities are
complying with the legal provisions on how the fund is operating as well as complying with the requirements for funding.
The paper identifies several potential challenges that might be faced by supervisors with regard to the conduct or role of actuarial professionals. These relate to: quality of actuarial assumptions, use of technical language, inaccurate information or responsiveness of professionals involved in actuarial
calculations and reviews, their independence, adequacy of resources, availability of timely information and observance of statutory requirements or legal changes.
Background Paper
