Pensions Actuarial Consultancy

Our trustee de-risking consultancy services feature a range of standard risk mitigation options, as well as more challenging ideas, based on current themes and availability in the market. We’ve helped many clients to de-risk over the years, providing services such as:

• Data cleansing exercises
• Buy-ins and Buy-outs
• Formulation of investment strategy
• Insuring pensioner liabilities
• Insuring deferred pensioner liabilities
• Enhanced transfer value exercises
• Pension increase exercises
• Promoting early retirement options
• Alternative financing
• Longevity swaps.

What are commutation factors and how are they calculated?

Commutation factors are the conversion rates used to exchange defined benefit pension for a tax-free lump sum at retirement. They determine how much annual pension a member must give up for each pound of lump sum received. The scheme actuary calculates commutation factors using assumptions about mortality rates, investment returns, and inflation to ensure the lump sum paid represents equivalent value to the pension exchanged. These factors need regular review to remain appropriate for current market conditions and the scheme's funding position, balancing fair member outcomes with responsible scheme cost management.

What is an actuarial valuation and what does it involve?

An actuarial valuation is a comprehensive financial health check of a defined benefit pension scheme, typically conducted every three years. The scheme actuary assesses whether the scheme holds sufficient assets to meet its liabilities by calculating technical provisions – the estimated cost of all promised benefits. The valuation compares these technical provisions against current assets to identify any pension scheme deficits or surpluses. Under the The Pensions Regulator's (TPR) funding code, the actuary also uses actuarial modelling to project the funding position under different scenarios. The results inform crucial decisions about contribution rates, investment strategy, and the funding plan needed to secure members' benefits.

How does the TPR funding code affect actuarial advice and scheme funding?

The TPR funding code sets the regulatory framework for scheme funding strategy and deficit recovery plans, significantly shaping the actuarial consulting advice trustees receive. The scheme actuary must provide actuarial modelling demonstrating how the funding position will evolve under different scenarios, helping trustees understand risks and comply with regulatory requirements. What is actuarial consulting in this context? It's about providing clear, pragmatic guidance on balancing member security, employer affordability, and regulatory compliance. At Quantum Advisory, we use transparent actuarial modelling tools to help trustees engage directly with funding assumptions and understand the trade-offs, ensuring well-informed decisions that satisfy both the TPR funding code and a scheme's specific circumstances.

What role does the scheme actuary play in managing pension scheme deficits?

When actuarial valuations reveal pension scheme deficits, the scheme actuary develops and monitors the recovery plan through sophisticated actuarial modelling. The actuary projects how deficits might evolve under various contribution levels and investment strategies, helping trustees negotiate realistic recovery plans with employers while meeting TPR funding code requirements. Beyond identifying shortfalls, actuarial consulting explores creative solutions: adjusting commutation factors to manage costs, implementing de-risking exercises, or identifying investment opportunities to accelerate deficit reduction. The actuary provides ongoing monitoring between valuations, alerting trustees to material funding changes. At Quantum Advisory, we take a collaborative approach, working with trustees and sponsors to find pragmatic, sustainable solutions that ensure a scheme's long-term security.