All that would be needed is to have an actuary determine the size of the liability and its duration, which would then be fully funded by buying the appropriate quantity of government bonds.
Towers Watson, the consulting actuary, calculates that, on current projections, the retirement age will increase to 68 in 2041 (five years earlier than planned) and to 70 by 2065.This is painful but welcome.
At the start of the year, a survey of fund managers by Towers Watson, an actuary, found that 81% were bearish on government bonds.
Paul Bonser, an actuary at Bacon & Woodrow, calculates that an American or German who starts working at 20 and changes jobs only three times in his life nevertheless loses fully half of his benefits in a final-salary scheme.
Stephen Yeo, an actuary with Watson Wyatt, says that, without reform, the cost of public-sector pensions is predicted to rise from 1.5% of GDP today to 2.3% in 30 years' time.
Nor did they know that many of the allocation decisions are in the hands of an "independent actuary".
According to Nick Horsfall of Towers Watson, a consultant actuary, British liabilities have risen by 15% over the past three years, thanks to lower nominal government-bond yields.In addition, deflation is a hidden risk for pension schemes.
A study by Tillinghast-Towers Perrin, an actuary, reckons that the total cost of asbestos claims worldwide will eventually be around $200 billion, with over $120 billion borne by the insurance industry.
When Jacques Aigrain took over from John Coomber as chief executive, the reinsurer's leadership passed from a man who started with the firm as an actuary 33 years ago —"an absolute classic of the old era," says a market observer to a man who joined just five years ago, having spent two decades as an investment banker at J.P. Morgan with expertise in mergers and acquisitions.
Chris Daykin, the government's actuary, has spoken about the "self-destruction" of DB pension schemes because of excessive complexity and changes to accounting rules.A new accounting standard, called FRS17, is undoubtedly blamed by many pension-fund managers.
The government actuary calculates that, when invested over a working lifetime, this amount should generate big enough returns to pay a pension of at least equal value in real terms to the current basic state pension.
