This document, consisting of several papers, sets out to provide a basis for discussion among actuaries of the Vision and Values of the United Kingdom actuarial profession. The profession realises that a clear vision and a strong sense of shared values are important attributes of a successful organisation. Following on from the work that has been done already in recent years on the mission and strategic aims of the Faculty and the Institute, several issues have been highlighted and need to be resolved so that the profession can move forward into the future.

In this document the Councils have stated what they consider to be the key elements of their vision for the profession in 2020 and of the values that they think the profession should have. These and the issues that arise from them are expanded in this document to give a focus for discussion.

The actuary has played a role in regulation in the United Kingdom since 1819. More recently, in 1974, the Appointed Actuary system was introduced for life insurance companies, backed by strong professional guidance. Derivatives of the Appointed Actuary concept have been implemented in a number of other countries. Meanwhile, in the UK, defined benefit occupational pension schemes are now required to appoint a Scheme Actuary, who has a statutory whistle-blowing role under the Pensions Act 1995. A number of statutory roles for pension actuaries were in place prior to this. In general insurance, Lloyd's syndicates are now required to obtain an actuarial opinion on the end of year provisions, as part of the Lloyd's market regulatory structure, and friendly societies must obtain an actuarial opinion on their technical provisions once every three years. This paper reviews some of the different regulatory roles of the actuary in the UK, draws some comparisons with the situation in other countries, considers the strengths and weaknesses of the present situation and invites debate and discussion on the way forward in order to optimise the contribution which the profession can make to the public interest in the field of regulation.

In this paper we review three algorithms to calculate the probability of ruin/survival in finite time for the classical risk model. We discuss the computational aspects of these algorithms and consider the question of which algorithm should be preferred.

In this paper we investigate the effectiveness of the Minimum Funding Requirement (MFR) (pre-1999 version) under random future investment conditions. In particular, do the various liabilities calculated under the MFR deliver a suitable level of security to pension scheme members?

The paper considers active (and deferred) members and current pensioners separately.

For active members, Monte Carlo simulation is used to compare how the proceeds arising from investment of the pre-1999 MFR liability in an equity-backed personal pension would compare with the deferred pension promised by the scheme. It is found that, while there may be the intended 50% chance that the personal pension has a better outcome, there are very substantial downside risks for younger members. Investment strategies based upon index-linked gilts are shown to result, on average, in lower personal pensions, but they provide an extremely effective means of limiting the downside risks.

For pensioners, Monte Carlo simulation is used to find the distribution of the initial amount of assets required to pay off precisely the pension liabilities as they arise. This investigation considers the effectiveness of the 12-year rule and different investment strategies. The 12-year rule in combination with an equivalent investment strategy is shown to provide reasonable security for a typical group of pensioners. However, if investments are restricted to an appropriate mixture of gilts then the level of security for pensioners is much increased. In particular, we investigate the use of value-at-risk reserves. It is found that 95% value-at-risk reserves are lower for a mixed conventional/index-linked gilts strategy than a mixed gilts/equity strategy.

It is argued, because of the high degree of downside risk, that there is no place in MFR calculations for high, anticipated equity returns. Instead rates of interest should be based solely upon fixed-interest and index-linked gilt yields.