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What does a Pensions Actuary do?

By C. Mitchell
Updated Mar 03, 2024
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The job of a pensions actuary is to help pensions providers set pension rates and craft retirement policies that minimize risk. Actuaries in all disciplines shape their careers around financial calculations, forward-looking statistical projections, and math-based predictions related to longevity, financial risk management, and mortality risk assessment. In the pensions subdivision, actuaries apply their skills to the creation and maintenance of sustainable retirement plans. Most pensions actuaries work in pensions actuarial firms, while others work directly for corporations or government entities.

Pension plans are popular employment benefits offered in many lines of work as an incentive for lifetime service. Employees who qualify retire secure in the knowledge that their pension plan will continue sending them a paycheck, or at least a portion of their paycheck, until they die. Some pension plans also offer medical care subsidies. Most governments offer pensions to civil servants, and a host of private companies around the world have followed suit. Pensions can be tremendously expensive to maintain, however, and founding entities usually require the services of a pension actuary to set up and administer the plans.

The primary task of the pensions actuary is to give advice on pension-plan creation, calculating both what makes sense in the present, and what is likely to be sustainable in the long-term. Actuaries will first analyze the dynamics of the work environment, including how many employees there are, how old those employees are, and how long those employees are likely to live. Then, the pensions actuary will make predictions about the future of the company’s growth and profits, the general economic outlook, and the future health care climate in coming up with a pension plan recommendation. The majority of these predictions and calculations are made according to the tenets and principles of actuarial science.

Most of the time, the pensions actuary tries to strike a balance between saving the plan provider money while still providing competitive benefits to employees. In some sense, the pensions actuary acts as a financial analyst for a given company or agency’s pension situation. The actuary must be able to explain to the plan providers why the plan is sound, how the plan will derive its funding, and what the long-term costs to the provider are likely to be. Many countries have national laws regulating the administration of pension plans, and a pensions actuary must also assure that a proposed pension plan meets any applicable legal requirements.

Government agencies and entities often employ actuaries as permanent staff to manage government pension plans, and to keep those plans constantly updated as economic circumstances change. Some larger companies also hire full-time actuaries. Most pensions actuaries serving the private sector work in actuarial firms, and provide pensions advice and risk management projections on a project-by-project basis.

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