abcd. PRMIA Meeting 16 July 2003 . Liability Benchmark Portfolio The relationship between Pension assets and liabilities Institute/Faculty Working Party.
service to date
including statutory revaluation, and increases
exclude discretionary payments
Present value of the accrued liabilities are a measure of their “fair value”
Liabilities are not traded so we need a proxy
the Liability Benchmark Portfolio (LBP)What liabilities to consider
the portfolio of assets such that, in the absence of future contributions, benefit accrual or random fluctuations around demographic assumptions, the scheme maintains its current solvency level (the ratio of assets to liabilities) as economic conditions change.What is the LBP?
As at 1 January 2003
PV = £175m
Consider a scheme which holds assetsRelationship between assets and liabilities?
Does not capture demographic changes
No allowance for the benefit outgoes and contributions paidLimitations of the LBP
standard financial techniques
some actuaries already use similar approaches
educational tool for better informed decision making
…consistent with MynersConclusions