Future of Pension Actuaries?

Hello all,
I am an actuarial graduate from a UK university currently holding an offer form a top-tier consulting firm to be part of their retirement benefits team. Although I always believed my skill sets were ideally suited for a consulting environment and that my career would naturally progress in this direction, I now have a slight doubt about the future of Pension Actuaries worldwide.

Being an American, I have kept a close watch of pensions in North America, and after a lot of reading I summarize the market in America for Pension actuaries as very bleak. Primarily because the number of defined benefit pension plans (primary area of actuarial work in pensions) in the US has been on the decline for many years. The steel companies have all terminated their pension plans. The airlines are shedding their plans and there are worries that automakers and suppliers may terminate their plans too. The icing on the cake is that a number of large healthy employers (Verizon and IBM are two of the latest) are either closing their plans to new employees or freezing participants' benefits. According to a Watson Wyatt study, 11% of Fortune 1,000 companies with DB plans had frozen or terminated their plans in 2004, up from 7% in 2003. The trend reflects in large part the financial market swings that left many plans severely underfunded, wreaking havoc on corporate bottom lines.

Everything said about America, my primary concern is the European market, I have read that the outlook in UK is very positive for the next few years due to
1. Change to IFRS accounting
2. Multi-employer rules
3. Scheme Funding
4. A-day
5. The Pension Regulator

It would be extremely helpful if someone could elaborate more on the above or provide more insight on the UK market.

Also, no matter how much I ponder about the future, there is no way I could decline my current offer. With the kind of cut throat competition out there for entry level trainees, it would be foolish to let this go this opportunity. The best I could do is insist on a move to Health & Welfare practice within the firm.

If someone could also talk about Health & Welfare Vs Retirement benefits with emphasis on the difference in kind of work and outlook of each with a UK bias.
Thanks & Regards.


PS. The above may include quotes from posts by members, Malik Shabazz wooHoo and D.W. Simpson Webmaster on actuarialoutpost.com

 

the short term for pension in the uk is ok, but the long term is extremely bleak.

beyond 5 years time, the role for pension actuaries in the uk is going to become quite limited.

do yourself a favour and get into general insurance, life or investment...

 

Sure you know this but consultancy doesn't have to mean pensions/health. For example there are a lots of GI consultancies which advise the Insurance companies. I'd say (but am willing to be corrected!) that there is more "consultancy" work in the GI consultancies than the pensions ones.

Hope I'm not going to be accused of being unprofessional for suggesting this but could you not accept the job offer but keep looking? I'm sure it happens alot.

 

deven,

You're in a tricky position. It wasn't too long ago I was a graduate!

During 2004 the graduate market was even slower than it is now.

Your problem is that you don't really want to work in pensions because you think it has no future, but also you don't want to still be job searching in another 6 months time (which is very possible).

Many graduates take the first job offered with the mentality that it's a job and they can always switch disciplines in the future. There is some truth to this, but be warned it is NOT a very easy thing to do.
There is a lot of competition from other (discipline) disillusioned actuarial students - & you will nearly always, only offered the job, if they can't find somebody else already in the industry with some experience.

So I would say, only take the pensions job if it's what you want to do long term, or if you will find it difficult to secure a job in another actuarial discipline.

A good question to ask yourself is how many interviews have I attended in the last 3 months. If the answer isn't at least 3 then I'd have serious concerns about turning this one down.

And anyway, it's still actuarial, it will still pay well.
Some pension consultancies are better than others. Some of the big well known ones aren't 'all that' and you may actually enjoy working for a smaller company instead.

If you are an achiever, you'll succeed whatever you do!

Good luck!

 

personally if i could turn back the clock, I would not have joined pensions, but at the time it was really the only area I got offered a job in.

if it's a top consultancy, you could always shift to investment consulting after a couple of years - i know a lot of people at place like mercer do this...

my only advice would be to bear in mind you have a long career ahead of you, and it is a near certainty that pensions will become a very small market in 5-10 years time.

I don't think any company in their right mind would setup a new DB scheme, the layers of legislation have become unmanagable and extremely expensive to comply with.

Now with the pension regulator's new powers ("sorry XYZ Ltd, you cannot pay dividends to your shareholders since your funding level is too poor"), I can see most companies thinking that they need an exit strategy from DB.

DC schemes require little actuarial input, so we are at the beginning of the end imho. I guess the direction the Insitute of Actuaries is looking, will be for more actuaries to move into investment (e.g. why do we suddenly have so many possible investment exams).

 

Congratulations on your offer. A foot in any door is a great step.

As for the future, I wouldn't want to call it. Too many things can happen and there is but one certainty: the longer term your assumption the greater probability there is of being wrong! Just look how the number of life offices have contracted with take-overs & mergers etc.

I'd caution against your comment on 'insist on a move'. If rotation is a natural feature of the company, then you are looking at a timeframe of probably 18months to 2 years. To get the best chance of getting your preference heard, is that all is well in the office & with the exams. I've known just as many actuarial grads who struggle with the exams as fly. Studying & working can be a whole new ball-game that takes the shine off a previous academic record. But I guess you've researched the pass rates.

Have you spoken to the consultancy post offer? If they like you enough, they may value your honesty and maybe refer you to the other arm now.

Alternaively, hedge your bets. Have you thought of joining a composite life office? Then you can get exposure to the different disciplines though opportunities to meet external clients are curtailed. I got exposure to final salary pension business (triennial valuations, funding advice etc) & traditional life office work without a change of co (though I've moved since). Settled on life as I find it more interesting but actuarial skills do travel well.

As they say, it's not where you start it's where you finish..... Do whatever makes you happy.

Welcome to the profession!

 

It's a difficult one to call because no-one knows what will happen in the future. Since I graduated and joined a pensions consultancy in 2000, a very quick demise for pensions actuaries has been predicted. A lot of firms reduced their graduate intake to reflect this outlook but we're busier now than at any time since I've been here and we're regretting the decision not to recruit more. Admittedly, the Pensions Act and Finance Act have temporarily increased workloads so it will be interesting to see what happens when that settles down.

Clearly things will change in the long term, but a lot of schemes are just closing to new entrants which leaves pension actuaries a reasonable amount of work in the medium term. Pension actuaries will need to adapt their skills long term and I think that's started already as actuaries move away from the traditional Scheme Actuary role.

And who knows what the future will hold - in the early 90s, everyone wanted a DC pension scheme and it has come full circle!

 

I worked in a pensions consultancy for 5 years but moved to a general insurance company about 6 months ago.

I can honestly say that GI work is far more interesting and diverse than anything I ever did in pensions. As much as you may think consultancy work is varied I am afraid that when it comes to pensions, liability valuation projects will form the bulk of what you do for at least the first few years.

Within GI however, there is a huge variety of things that you can get involved in; from reinsurance, to reserving, pricing to modelling. And the industry is expanding rapidly too!
I think that nowadays, there is not much to choose between consultancies and companies. Within companies, there is segregation from departments and a type of consulting is required e.g meeting with underwriters. Not to mention the fact that you may have dealings with auditors and regulators and perhaps even other insurance companies.
As someone else said, if that doesnt take your fancy, you could even work for a GI consultancy - PWC have a huge department, I think over 100 people!

On the whole, I think the outlook for GI actuaries is a lot better than that for pensions actuaries. Add to that the work is far more exciting and statistical based (which is what I assume mathsy people like) and it just adds up to one choice really.
Given my time again, I wouldnt have wasted all the years I did in the pensions consultancy where, as a trainee for the first 3 years, I met 1 client! (They tend to take qualified people out with them instead!)

Apologies if I am stepping on anyone elses toes - guess I just got extremely disgruntled in my old job.

If there is one thing I could advise you to do its to hold out for your first choice. It may sound corny but if pensions definitely isnt something you want to do then dont just settle. If you are bright enough you will get another job offer and maybe sooner than you think.
I think that with a career/job it forms such a major part of your life that if you agree to doing something that your whole heart isnt in, it will just make you unhappy in the long run.

Best of luck

 

fatsam - i whole heartedly agree with you. i have worked in pensions for quite a while and have constantly wanted to leave...i've finally made the change now, and will be moving to GI fairly soon!

most people I know in pensions want to find a way out...and if it does blow up as expected, the market will be flooded with unemployed pensions actuaries wanting to move into GI / investment / life...that will be an bad time to be looking for a job.

other thing to bear in mind, if you go into pensions and find you cannot pass the exams (which will be about 60% of people joining as a trainee), then you are pretty much stuffed. there is no real role for given up exams people in pensions, besides pension admin, which is the pits.

 

I agree with you. Thats why I'm looking to move from pensions sooner rather than later!

 

Interesting point. In GI, if you fail the exams you can still go on and do very nicely indeed!

It really doesn't impact career progression that much, especially in pricing.

 

Gareth
Congrats with your move. I hope it goes really well. I have enjoyed the first few months of my new role. If you have time then I would definitely recommend reading some of ST3 as it can help you with the terminology if you dont know it already.
Best of luck

 

I've been working in pensions consulting for almost 4 years now, and I am 2 exams from qualifying. The work really isn't very interesting, hence I'm hoping to switch to GI. Any interview tips?

Thanks!!