So, what is an appropriate cost today for the future pensions of 5 million public sector workers?
How can we convince investment markets of the reliability of cash flows from the Student Loan book enough to secure the best price for government from an asset sale?
What is the NHS’s liability for clinical negligence claims and what influences it?
What is the appropriate solvency standard for the emerging defined benefit pension consolidators?
These are all fascinating areas where public policy and the national interest intersect with the worlds of risk and uncertainty. Where there is no right answer but where an intelligent and informed analysis based on evidence and assumptions can lead to better decisions, and – in many cases – the avoidance of unnecessary costs.
Welcome to the world of government actuaries!
What are actuaries?
Actuaries are financial risk professionals, and here at the Government Actuary’s Department (GAD) we provide impartial actuarial analysis to government and public sector clients. Our expertise covers insurance, investment, modelling, quality assurance, data science, pensions and social security.
But, as you might imagine, this is not the whole story.
Real-world problems we’ve worked on
The work we do here at GAD relates to real-world issues. Our expertise translates to providing help with issues which can range from climate change implications to developments in human longevity; from advising on public sector pensions to identifying fiscal risks to government.
In fact, you may have heard about our work without realising it, because over the past year we’ve:
- advised the government on the rate used to work out lump sum damage awards for people who suffer personal injuries
- illustrated how pension entitlements could be worked out for eligible members of the judiciary
- proposed a new Flight Protection Scheme to protect passengers if an airline becomes insolvent while they’re abroad
- helped the World Bank and developing countries plan better for financial losses relating to natural disasters
- provided actuarial support to economic regulators such as Ofgem and the Civil Aviation Authority, helping them work out how much to set aside for pensions
Our work on pensions reforms
In a more traditional part of our world – public service pensions – we are helping government respond to the major setback caused by an adverse Employment Appeal Tribunal ruling. It has meant that transitional arrangements for the introduction of the reforms (the Hutton reforms) to public service pensions in 2015 were unlawful on grounds of age discrimination.
This profound ruling will affect the pensions of around 4 million public sector workers and require remedial measures of the utmost complexity in all the 20 public service schemes.
GAD has great institutional knowledge of government pensions which at times like this is a huge asset. We understand the public spending context of these schemes, as well as the detailed technical aspects of liabilities that are just short of £2 trillion on the government balance sheet.
We have the analytic capability to process the data on 15 million members and quantify the future liabilities, enabling decisions to be taken on affordable benefit levels and appropriate allocation of costs between departments, employers and different generations of taxpayers.
Taking the long view
Changing circumstances and assumptions are nothing new to experts here in GAD. Actuaries deal in long-term issues, which is just as well because 2019 marks the department’s centenary!