Ensuring that the Fund can continue to pay benefits over the long-term is of primary importance to the Board, clients and wider stakeholders. Like most other defined benefit pension plans, the Fund’s solvency is monitored through two key studies:
These studies and other actuarial matters in the Fund are supported by the Committee of Actuaries, comprising an international group of independent volunteer actuaries, with actuarial services provided by the Consulting Actuary, as set out in the Fund’s Regulations.
The Fund’s actuarial valuation is undertaken using various economic and demographic assumptions to model the future and associated uncertainties. This values current and future liabilities, for comparison against current and projected assets.
The actuarial valuation considers the Fund from different perspectives, including:
With liabilities extending over an average of 40 years into the future, it is also important to note that the actuarial valuation takes a long-term view of the Fund’s assets. Short term market fluctuations in assets are smoothed. This minimises the risk of the long-term assessment being distorted by short-term capital market movements (both up and down) that should not impact the Fund’s ability to meet its obligations.
Open group valuation: The 2021 actuarial valuation resulted in a required contribution rate of 21.4% of pensionable remuneration, which compared against the current actual contribution rate of 23.7%, equated to an actuarial surplus of 2.3% of pensionable remuneration. The following diagram shows recent historical results.
Closed group valuation: The 2021 valuation resulted in a closed book valuation of US$70,873.8 million in accrued benefit liabilities, as compared with an actuarial value of assets of US$82,911.7 million. This equates to a funded ratio of 117.0%, with the historical funded ratios summarised below.
The Fund procures the quadrennial ALM study from an external consultancy. The main objectives of the study are to:
The results are utilised by the Office of Investment Management (OIM) in setting the Fund’s investment strategy, and by the Board in understanding the effects of potential plan design changes and future demographic trends.
The last ALM study was undertaken and published in 2019. At the time, the key conclusions were that:
The next ALM study is due to be completed in 2023.