Many schemes are considering a new actuarial consultant, as changes to the UK pension scheme market affect the way schemes are managed.
In this video, Paul Houghton, Partner and Head of Actuarial Consulting, talks about the challenges consultants face to look beyond typical relationships and bring fresh new ideas.
Although schemes feel the need for a fresh approach, they don't necessarily know where or how to find it. There are a number of challenges when it comes to managing their actuarial consultant relationship.
Here, Paul Houghton talks about how to find the right actuarial consultant to give schemes the fresh approach they are looking for.
The UK pension scheme market is changing. While schemes continue to mature, their priorities and needs evolve.
As the number of pensioners increases, schemes’ cashflow is becoming restricted, or even negative. To secure benefits for their members, as well as their need for security, schemes must reconsider their strategy. This includes asking if they have the right strategic partner to meet their needs.
Previously, changing actuarial consultant has been uncommon. However, according to our report, almost half of schemes will have changed or are considering changing their actuarial consultant in the next year.
Despite being ready for change, trustees may not have fully considered what skills are needed from a new adviser, or what priority they should give them. Furthermore, without measuring the value an actuarial consultant adds to a scheme, it is hard to determine what value change will bring. Once a scheme has identified what it is they require from their consultant, they will be better placed when choosing the right strategic partner.
More than half (57%) of those surveyed expect to spend more on actuarial consultants over the coming year, but this should not be attributed merely to annual fee increases.
That so many schemes are seeking new consultants suggests they are looking for something different from their current actuary.
Free thinking and independence is one of the most sought-after qualities. Schemes entering this period of their development are after something new and a flexible and adaptable consultant that is not tied down by ‘the way we’ve always done things’ or house rules on how clients are managed will find they have many more clients willing to give them a hearing.
Further highlights of the research include:
That so many schemes are seeking new consultants suggests they are looking for something different from their current actuary. A lack of free thinking and independence of thought are identified by 38% of schemes as being the second most common area where a consultant falls short of their expectations.
Though each scheme rated their consultant’s performance over the past year, only 47% used set objectives and key performance indicators (KPIs) to assess the value provided by the consultant.
Any assessment process must take account of the important qualities and characteristics of a consultant, while applying the appropriate weightings so that less important attributes do not skew a report.