Most of the 350,000 persons who are actively engaged in the service of the General Post Office are established civil servants to whom the provisions of the Superannuation Acts, 1834–1957, apply. Arrangements for pensioning civil servants when they retire are of long standing, and the number of former Post Office employees drawing pension has now risen to about 70,000, most of whom are men.

It will no doubt be readily admitted that in these days investment profit makes the greatest contribution to surplus in life funds and it is not surprising, therefore, that many actuaries are called upon to devote a great deal of their time to investment problems. What is surprising, however, is the fact that property has so rarely been discussed at this Institute despite the large amount of life funds now invested therein.

The new series of Financial Times–Actuaries fixed interest indices commenced in 1977 with the first publication in the Financial Times of the British Government Securities Indices. These were described on behalf of the Joint Index and Classification Committee of the Institute and the Faculty in the paper by G. M. Dobbie and A. D. Wilkie, “The F.T.–Actuaries Fixed Interest Indices”, J.I.A. 105, 15 and T.F.A. 36, 203. Subsequent notes in J.I.A. and T.F.A. have given annual reviews, the last, for 1980, appearing in T.F.A. 37, 327. Part 1 of the present note continues the history of the B.G.S. Indices up to the end. of 1984.

Reference is made in the introductory remarks to the appointment of Investment Research Committees by the Faculty and Institute of Actuaries to undertake, in the first instance, the compilation of a comprehensive service of Index Numbers relating to British Stock Exchange Securities which will be suitable for Insurance Companies, Trust Companies, and so on. The Committees have been at work for some time, and it is hoped that publication of the results will be commenced at an early date. The Paper discusses the purposes of such indexes and the most suitable form of index numbers for the purposes decided upon. The difficulties arise from two sources ; the variety of uses for which the index must cater, and the requirement that the results must be comparable between any two dates in the series.

At every point in compilation the objects of the results must be carefully kept in view. These objects are divided under three headings : (a) uses directly connected with current investment activities ; (b) investigation of the effect of economic financial and political events on the level of security prices ; and (c) assistance in measuring approximately changes in the value of a portfolio of investments. It is suggested that securities should be divided into homogeneous classes, and a separate index calculated for each class. The wide groups “Fixed Interest” and “Variable Dividend” are not suitable for the purposes involved. The weighting system should approximate to the distribution likely to be found in an Insurance or Trust Company's investments.

Within each class companies' holdings will tend to approximate more nearly to equal amounts of money in each security than to any other distribution for which a system of varied weights would cater. Simple weights are accordingly advocated.

Various methods of averaging are discussed and reasons given for preferring the geometric average of price ratios to other methods. The dangers of adopting the arithmetic average—where the resulting figures are always dependent on the base prices—are illustrated in Table I. The geometric results are independent of base. Even using the geometric average great care must be exercised in applying the results to valuation purposes in groups where individual price movements show wide divergencies. The “error” involved by the geometric method, however, is always in the same direction. Capital appreciation is never overstated and depreciation never understated.

The foregoing remarks refer to price indexes. To obtain maximum utility from the results yield statistics also are required. The very different nature of the problem of yields is stated and an arithmetic average of individual yields in each group is advocated. While the price index should be related to 100 at the starting-point it is obviously preferable to publish actual yield averages.

An Open Meeting was held by the Faculty of Actuaries on 15 October 2001, when Mr Myners addressed his audience on a number of the issues raised in his review, Institutional Investment in the United Kingdom: a Review. This was followed by a discussion. The lecture and an abstract of the discussion are printed after this introduction.

A second meeting on the subject was held on 16 October. This was a joint Seminar, arranged by the Faculty of Actuaries and the Centre for Financial Markets Research, University of Edinburgh. This seminar covered a number of issues raised by the Myners Review. The purpose of the seminar was to open up to discussion a number of the issues raised by the review where there appeared to be differences of opinion amongst practitioners. In particular, the investment process, investment performance and fees, especially commissions, were discussed. Academics, investment, performance measurement and pension specialists attended the seminar.

This abstract relates to the following paper:

RichardsS. J., CurrieI. D. and RitchieG. P.A Value-at-Risk framework for longevity trend risk ‐ Abstract of the London discussionBritish Actuarial Journal, doi:10.1017/S1357321712000451

In the recent past life companies have made many decisions which they have had cause to deeply regret. This paper looks at the range of decision making theories available. It then examines recent examples of decisions that had unfavourable consequences and explores why they were taken, and goes on to describe a systematic approach to decision making which can help management assess more objectively the difficult choices confronting them today. The approach does not require espousal of any specific decision theory or method of value measurement. The focus is on the decision making process and the organisation's capacity to handle change. The paper identifies the three requirements for effective decision making.

Diversification across asset classes has declined markedly in the last decade and concerns abound about the ability (or lack) of the financial system to weather another 2008-like event. There is a growing volume of academic literature seeking to derive measurement variables for detecting systemic risk. There is clearly a role for the actuarial profession within this discussion and we hope that this paper can engender further discussions and papers on this specific issue.

Just as diversification across conventional asset classes has decreased there has been greater attention paid to the broader array of potential investment strategies that can be accessed via derivatives. The paper explores the prudent management of derivatives in pension funds and general asset portfolios to improve portfolio efficiency both in terms of implementing investment strategies and in broadening the range of investment opportunities for building an efficient investment portfolio from a risk-based perspective.

This presidential address looks at the current state of affairs, the opportunities and threats to our traditional areas of interest and the importance of developing in wider fields. It pays tribute to all the volunteers who help make it the organisation that it is whilst highlighting the need for all Fellows and students to be engaged with its future.

The original intention of this paper was to discuss the impact of income tax on annuity business only. In practice it was found impossible to discuss the impact on annuity business without at the same time discussing the impact on Life assurance business. A company transacting Ordinary life assurance, Pension annuity and General annuity business is not assessable in respect of three separate businesses; for the purpose of income tax the company conducts only one business, i.e. ‘Life Assurance and Annuity business’. Attention is drawn to this point at the outset because it is considered most important. A student coming freshly to the subject should not be misled into thinking that separate taxable units are involved because in the Income Tax Act, 1952 and the Finance Act, 1956 such terms as ‘annuity fund’ and ‘profits arising to an assurance company from pension annuity business’ are used. It may be noted that in this paper the term ‘fund’ has been avoided wherever possible, because, without precise definition on each occasion that it is used, it is liable to be misleading. It would be impracticable to discuss in one paper all the problems of a composite company which writes all classes of insurance business both at home and overseas. It is, therefore, proposed to consider only the position of a proprietary company which writes Ordinary life assurance and annuity business in the United Kingdom, values its liabilities annually and is taxed on an interest less expenses basis.

This paper is the report of a Research Group which has been examining developments in calculating devices, the effects on actuarial work and the future outlook.

The European Economic Community came into existence on 1 January 1958, following the ratification of the Treaty of Rome by the parliaments of the six member countries, Belgium, France, Germany, Italy, Luxembourg and the Netherlands. The long-term aim of ‘The Six’ in setting up the Community was to achieve a unified economic unit with a common economic policy, and whilst commonly referred to in the United Kingdom as the Common Market it should not be thought of merely as an advanced form of customs union.