Actuarial Methods for Valuing Pension and Social Security Schemes

Course 5A of the Association's actuarial programme — professional valuation of employer pension schemes and social security systems. The course covers the architecture of pension systems, the design of defined benefit and defined contribution schemes, assumptions and funding methods, the stages of an actuarial valuation, reporting under IAS 19, investment of pension assets, pay-as-you-go systems, demographic projections and stochastic modelling. It concludes with a comprehensive pension case study.

Course programme

1. Architecture of pension systems — pillars of the system, hybrid schemes, risk sharing, replacement rate.
2. Design of defined benefit schemes — benefit formula, indexation, early retirement, surviving spouse's pension.
3. Defined contribution schemes — accumulation and charges, lifecycle, annuity and programmed withdrawal.
4. Data and actuarial assumptions for pension valuation — consistency of financial assumptions, mortality improvement, sensitivity.
5. Funding methods for defined benefit schemes — projected unit method, entry age method, aggregate method.
6. Stages of a pension scheme actuarial valuation — asset smoothing, deficit and its recovery, analysis of variances.
7. Financial reporting of employee benefits — IAS 19 obligation, net interest, remeasurements.
8. Investment of pension assets — liability-driven investment, hedging, surplus at risk.
9. Social security systems — pay-as-you-go balance, reserve fund, parametric reforms.
10. Demographic projections — age shifting, mortality improvement, dependency ratio.
11. Monte Carlo method in pension valuation — distribution of the funding ratio, probability of deficit, VaR and TVaR.
12. Comprehensive pension case study — valuing an employer scheme from data to a recommendation to the board.

Each lesson comes with study notes containing a table of notation, a worked example and self-study problems, plus a lesson test. The course final test has 45 tasks, including pension case studies and a Monte Carlo problem, and leads to an ASAB certificate.

Duration: 12 video lessons, 2 h 56 min of video + lesson tests and a final test.