Acturial Consultants
In a recent report by Lane Clark and Peacock highlighted that for their 2008 reports the FTSE Global 100 companies "in the main chose to select a discount rate of between 5.8% and 6.59%, although the full range of rates selected swung from less than 5% to 6.59%. This was a significant change from 2007 accounting when the bond rates selected were largely priced at between 5.2% and 5.8%."
These discount rates are very significant and will clearly affect the calculations of the financial health of a pensions scheme.
The trustees of any pension scheme need to be happy that the assumptions used by the Scheme Actuary are reasonable and suitably conservative, taking into account the strength of the employers covenant.
It is very important that the Trustees are comfortable with the consultant providing this advice.
The cost of actuarial advice can vary greatly and Trustees should review the cost and the service provided on a regular basis. It may be possible to reduce costs by moving away from one of the larger consultants to an alternative firm. This may also lead to a better quality of service as your scheme becomes relatively more important to the smaller consultancy.
My View
The role of Investment consultants can broadly be split into to areas - investment strategy and manager selection. In general manager selection naturally follows on from the strategy that is set by the trustees.
With detailed analysis of recommendations and subsequent monitoring of the strategy Trustees will a better chance of being sold unnecessarily complex and expensive investment solutions.