Retirement

The retirement fund industry is governed by the Pension Funds Act. In terms thereof an actuary that has been approved as a fund valuator by the Registrar of Pension Funds is required to ensure, at least every three years, that the fund’s assets are sufficient to meet its liabilities. These liabilities comprise the future withdrawal, death and retirement benefits described in the fund’s rules. When the assets of a fund are greater than its liabilities, the excess assets are referred to as the fund’s “surplus”.

Where a fund’s assets and liabilities are matched, as they generally are in modern defined contribution arrangements, triennial statutory valuations are unnecessary. A certificate applying for exemption from actuarial valuation is submitted instead.

In the early nineties many defined benefit funds converted to defined contribution funds. Predictable pensions, as a percentage of final salary, were effectively converted to savings accounts that grew with interest. This went hand-in-hand with a transfer of the fund’s risks from the employer to the member. These risks include poor investment returns, improving longevity and, in many cases, increasing fund expenses. This trend to defined contribution dispensations originated with members whose penal withdrawal benefits enriched the funds, and often the employer. Employers supported this drive as it meant a move away from open-ended liabilities and because it facilitated cost-to-company remuneration strategies.

The Pension Funds Second Amendment Act introduced legislation aimed at clarifying surplus ownership, improving withdrawal benefits and, where surplus existed, returning some of the surplus that arose as a result of poor past withdrawal benefits to former members of the fund.

ARCH consults to almost 50 pension funds. As valuators we are involved in the following services:
     • Statutory three-yearly valuations, and interim valuations where necessary
     • Regular benefit calculations including actuarial reserves values, minimum benefits        and additional past service calculations
     • Pension increase and bonus recommendations
     • Conversion valuations and strategies

Other pension fund consulting includes:
     • Surplus apportionment exercises
     • AC116/IAS19/FRS17 valuations for the employer’s financial statements
     • Section 15K tribunals appointed to oversee the finalisation of surplus schemes
     • Independent reviews of surplus schemes and conversion valuations
     • General consulting in merger, takeover and termination situations