Analysing and understanding pension scheme finances is
an important area for Employers and Trustees.
First Actuarial is well placed to help. We have developed an interactive graphical
software package - ModelScheme - to illustrate the potential impact of different
business strategies and economic scenarios on scheme finances.
How does ModelScheme help?
ModelScheme provides Employers and Trustees with:
- Education: A thorough understanding of the finances of their scheme and those factors
that will affect the funding level of the scheme and the contribution rate required
in future years;
- Assessment of Attitude to Risk: Overall, there is a trade off between the short-term
volatility of the scheme’s funding level and the expected long-term cost. We can
help the Employer and Trustees to better understand this trade off and so make better
informed decisions on an appropriate balance;
- Determination of Appropriate Asset Allocation: We can assist in decisions as to
how to allocate the scheme’s assets between the key asset classes (equities, gilts,
- Scheme Financial Planning Analysis: To-day, perhaps more than ever before, employers
are looking for ways to control the cost of a final salary pension scheme.
ModelScheme can explore a number of different options to provide answers to the
many “what if” questions being asked, such as
- What impact will changing the rate of accrual have on future contributions?
- What happens if no new members are allowed into the scheme?
- What happens to contributions if future accrual is stopped?
- What happens if there is a fall in investment markets?
Strategy Review Process for ModelScheme
We have formulated a Strategy Review Process to assist Employers and Trustees in
understanding the finances of their scheme. It comprises of four main elements:
- Collation of membership, asset and other data
- Set up of ModelScheme
- Meeting to discuss results; and
- Preparation of report summarising key recommendations.
The key part of the process is the meeting at which the results generated by ModelScheme
are analysed and discussed.
The results are presented in easy-to-understand graphical form providing the financial
information to support a meaningful discussion on a range of issues covering:
- Impact of different investment strategies on:
- Volatility of Funding Level/ Contributions
- Future Contribution Requirements
- Benefit Design
- Development of Cash Flow
- Management of Surplus/Deficit
The meeting can also be used to explore, in real time, additional “what if scenarios”
that may be of interest.
After the meeting, we provide a written report summarising the discussions and,
if appropriate, our recommendations.
Within the report we will use graphs to illustrate the unfolding of your scheme’s
finances under different economic or business scenarios
Free Trial Service
We offer a free trial service using the information and data contained in the last
actuarial valuation report. We will then meet with you to discuss the results and
show how different factors will affect your scheme.
Under our trial service, we do not prepare a report and our comments cannot and
should not be construed as advice – and hence cannot be used as the basis for any
decisions by the Employer or Trustees.
ModelScheme does not use detailed stochastic modelling techniques and simplifies
a number of the actuarial techniques that would be required for a formal actuarial
valuation. However, the results produced provide a valuable insight into your Scheme finances.
Should a more detailed study be required at any stage then we would of course be
pleased to help.
[A ModelScheme Demonstration can be accessed by clicking