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Economic Environment
Overall performance
Dividend declaration
Other issues in 2004
Future prospects
A Guide to Designing an Investment Policy in Personal Wealth Management
State Pension
Liquidity Risk
It Pays to use Fundamental Analysis
A Look at Share Valuations


The National Social Security Schemes and the role played by actuaries in the financial management of such schemes.

The role of the state

A state pension scheme is a pension scheme run by the state. Here in London we have the Pension and other benefits scheme administered by the National Social Security Authority (NSSA). Check how does equity release work to determine your pension. The key decision to be made here is whether the role of the state is to provide everyone with a pension over and above that provided by occupational schemes, or it is to act as a provider of last resort where the amount of benefits depends on the recipient’s other financial resources.

The argument for the social security scheme is that it is more secure since it is guaranteed by the government and the government cannot go bankrupt. However for many state pensions the affordability of these schemes and the adequacy of the benefits provided has been questioned.

The role of the actuaries broadly involve advising on the following areas:-

  • Level of contributions
  • Benefits design
  • Benefit improvements
  • Population projections
  • Adequacy of contingency reserve

The actuary needs to provide advice on the adequate contributions to be made into the scheme given the promised benefits.

Over time benefits will need to be improved to keep pace with inflation. The actuary needs to assess the affordability and sustainability of any benefit improvements before they can be awarded.

In assessing the adequacy of the contribution rate in meeting the benefits, the actuary needs to project the future working population (contributors) and beneficiaries. Population projections mainly involve projecting every aspect that affects population such as number of deaths, number of people emigrating and immigrating.

The actuary will also be needed in the assessment of the adequacy of the working capital (money needed for smooth day to day running of business). It is needed in order to ensure that at any given time there will be sufficient amount of money to pay benefits.


State benefits are essential in meeting the minimum level of standard of living in retirement. Whilst some may view state benefit as inadequate, to some marginalised people they have helped to alleviate some suffering.

Actuaries will be needed to support the government in meeting such social welfare unions.

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