Actuarial Notes

Pension Projections

By Society of Actuaries · 2020

Study guide: Exam RET-201

A Society of Actuaries e-learning module, in the Retirement Benefits track, on pension projections: a model of a pension plan over multiple periods, in contrast to a pension valuation, which provides liabilities and assets at a single point in time. The module introduces different modeling approaches, how to select assumptions, and ways to communicate the results. This page reads it through its published introduction and objectives; the module's own content is interactive and is not published as a document.

On the syllabus

  • Exam RET-201 — Outcomes 1a and 1b; the e-learning module Pension Projection, background only.

1 Understanding Purpose and Audience

  • identify the purposes of conducting a pension projection
  • identify the intended users and other stakeholders and assess the goals with respect to their plan
  • evaluate the requirements and the approach to conduct a pension projection
  • assess the intended users (not stakeholders), their expectations, and the impact adverse scenarios may have on decision making

2 Data Requirements

  • explain why the application of professional standards in Canada and the United States are important in the selection and use of data in a pension projection
  • assess the appropriateness and sufficiency of data for a pension projection
  • discuss the potential use of sampled data or summarized/consolidated data for a pension projection
  • describe the steps that can be taken to deal with data problems
  • explain why disclosures related to data that must be included in actuarial communications related to a pension projection

3 Model Approaches

  • understand the characteristics of models and how they are used in learning
  • understand different forecast methodologies
  • identify the limitations of models
  • assess the internal consistency of a model including assumptions and methods
  • understand other model parameters and issues
  • evaluate the model for purpose
  • examine the strengths and weaknesses of the model for its intended purpose

4 Liability Forecasting

  • understand the various liabilities subject to projection
  • understand various assumptions needed for a forecast
  • understand the different approaches to liability forecasting
  • identify a forecasting approach to match the business needs of the client
  • identify what is needed to develop the forecast

5 Asset Forecasting

  • discuss the purposes of asset projections
  • use the formula for the estimated market value of assets
  • name and discuss a variety of equity or stock investments
  • define asset classes and describe their underlying rates of return
  • compare and contrast growth and value stocks
  • explain credit fixed income investments
  • define and discuss the importance of diversification
  • explain the importance of stochastic models

6 Model Considerations for Pension Applications

  • analyze different types of pension plan designs and features
  • evaluate various governmental rules and policies given a hypothetical regulatory framework
  • evaluate risk-sharing and liability transfer exercises
  • assess the components of dynamic rebalancing
  • analyze a forecast study in the context of actuarial standards of practice in U.S. and Canada

7 Communication and Interpretation of Results

  • illustrates projection results under three ways of setting assumptions: a single set of demographic and economic assumptions specified for the assignment, multiple sets specified for the assignment, and multiple sets generated randomly by a model (stochastic modeling)

Sources

  • Pension Projections Module Introduction and Objectives (SOA) — the module's introduction, learning objectives, the seven section titles and each section's learning objectives (read in full; sha256 1daee2beaddbdaa283c2abc8d814b72b4d8112a9cc8385696894e42d8a260ec0). The document is copyrighted 2019 on its first page and 2020 on the section pages, and the year is the later one; the syllabus calls the module "Pension Projection" and the SOA document "Pension Projections", and the module's own interactive content was not read
  • RET 201 Syllabus, Mar 2027/Jul 2027 (SOA) — the citation (e-Learning Module: Pension Projection, background only) and the assigned outcomes (1a, 1b)