Hostname: page-component-745bb68f8f-d8cs5 Total loading time: 0 Render date: 2025-01-11T10:07:45.039Z Has data issue: false hasContentIssue false
  • English
  • Français

Pension Fund Valuations and Market Values

Published online by Cambridge University Press:  10 June 2011

S.J. Head ,
D.R. Adkins ,
A.J.G. Cairns ,
A.J. Corvesor ,
D.O. Cule ,
C.J. Exley ,
I.S. Johnson ,
J.G. Spain  and
A.J. Wise
S.J. Head
Affiliation:
Aon Consulting, Carnegie House, 21 Peterborough Road, Harrow, Middlesex, HA1 2AJ, U.K. Tel: +44(0)181-864-9966: Fax: +44(0)181-970-4798; E-mail: simon.head@aonconsulting.co.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

The traditional approach to United Kingdom pension fund valuations is to use an off-market approach to valuing assets and liabilities. This approach has been called into question for a number of reasons, such as changes to the taxation of U.K. share dividends and a growing understanding and appreciation of the key principles of financial economics. This paper looks at the history of the traditional approach and focuses on the drivers for change. We compare the properties of various methods that take assets into the balance sheet at market value against the traditional valuation method. Our principal aim throughout has been to produce a paper that is practical and helpful to pension scheme actuaries.

Keywords

Pension SchemesValuation MethodsMarket ValuesFundingPricing
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 6 , Issue 1 , 01 June 2000 , pp. 55 - 141
Copyright
Copyright © Institute and Faculty of Actuaries 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Cairns, A.J.G. (1999a). A multifactor, equilibrium model for the term structure and inflation. Proceedings of the 9th AFIR Colloquium, Tokyo.Google Scholar
Cairns, A.J.G. (1999b). A multifactor model for the term structure and inflation for long-term risk management with an extension to the equities market. Institute and Faculty Libraries.Google Scholar
Cairns, A.J.G. & Parker, G. (1997). Stochastic pension fund modelling. Insurance Mathematics and Economics 21, 43–79.Google Scholar
Crabbe, R.J.W. & Poyser, C.A. (1953). Pension and widows' and orphans' funds. Cambridge University Press.Google Scholar
Day, J.G. & McKelvey, K.M. (1964). The treatment of assets in the actuarial valuation of a pension fund. J.I.A. 90, 104–147.Google Scholar
Dufresne, D. (1998). Moments of pension contributions and fund levels when rates of return are random. J.I.A. 115, 535–544.Google Scholar
Dyson, A.C.L. & Exley, C.J. (1995). Pension fund asset valuation and investment. B.A.J. 1, 471–557.Google Scholar
Exley, C.J., Mehta, S.J.B. & Smith, A. D. (1997). The financial theory of defined benefit pension schemes. B.A.J. 3, 835–966.Google Scholar
Feldman, K. S., Bergman, B., Cairns, A. J. G., Chaplin, G. B., Gwilt, G. D., Lockyer, P. R. & Turley, F. B. (1998). Report of the fixed-interest working group. B.A.J. 4, 213–383.Google Scholar
Flesaker, B. & Hughston, L.P. (1996). Positive interest. Risk 9(1), 46–49.Google Scholar
Gordon, T. (1999). The price of actuarial values. Paper presented to the Staple Inn Actuarial Society.Google Scholar
Heywood, G. & Lander, M. (1961). Pension fund valuations in modem conditions. J.I.A. 87, 314–370.Google Scholar
Lee, E.M. (1986). An introduction to pension schemes. Institute of Actuaries.Google Scholar
Porteus, D.A. (1946). Pension and widows' and orphans' funds. Cambridge University Press.Google Scholar
Puckridge, C.E. (1947). The rate of interest which should be employed in the valuation of a pension fund and the values which should be placed on existing investments. J.I.A. 74, 1.Google Scholar
Rogers, L. C. G. (1997). The potential approach to the term-structure of interest rates and foreign exchange rates. Mathematical Finance, 7, 157–164.Google Scholar
Rutkowski, M. (1997). A note on the Flesaker & Hughston model of the term structure of interest rates. Applied Mathematical Finance, 4, 151–163.CrossRefGoogle Scholar
Smith, A. D. (1998). Salary related cash flows: market based valuation. Institute of Mathematics and its Applications Conference on Actuarial Valuations, Accounting Standards and Financial Economics, 20 January.Google Scholar
Wilkie, A.D. (1995). More on a stochastic asset model for actuarial use (with discussion). B.A.J. 1, 777–964.Google Scholar

Reference

Thornton, P.N. & Wilson, A.F. (1992). A realistic approach to pension funding. J.I.A. 119, 229–312.Google Scholar

References

Peters, E.E. (1991). Chaos and order in the capital markets. Wiley, New York.Google Scholar
Shiller, R.J. (1989). Market volatility. Massachusetts Institute of Technology.Google Scholar
Hagstrom, R.E. (1994). The Warren Buffet way. Wiley, New York.Google Scholar
Mandelbrot, B.B. (1999). A multifractal walk down Wall Street. Scientific American, February 1999, 70–73.Google Scholar

References

Conway, J., Berlekamp, E. & Guy, R. (1982). Winning ways. Academic Press.Google Scholar
International Forum of Actuarial Associations (1997). Comments on IASC ED 54.Google Scholar
Wise, A.J. (1998). Working party report on market based discount rates for pension cost accounting. Institute of Actuaries.Google Scholar

Reference

Bodie, Z. & Merton, R.C. (1998). Finance (preliminary edition). Prentice-Hall.Google Scholar