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A realistic approach to pension funding

Published online by Cambridge University Press:  20 April 2012

P. N. Thornton  and
A. F. Wilson
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Abstract

Recent developments which affect the financing of occupational pension schemes in the U.K. arc reviewed. These point to the need for realistic bases, and an approach to finding a ‘best estimate’ is described. It is suggested that typical bases contain significant margins and the long-term dangers of using bases which contain margins are illustrated using a model fund. A review of funding methods suggests that the projected unit and entry age methods should be used for normal purposes in conjunction with a discounted income approach to the valuation of assets. Suggestions are made as to the degree of prudence appropriate for funding purposes.

Keywords

AccountingActuarial BasisFundingPension SchemesSurplus
Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 119 , Issue 2 , 1992 , pp. 229 - 312
Copyright
Copyright © Institute and Faculty of Actuaries 1992

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