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Address by the President. The outlook for pensioning

Published online by Cambridge University Press:  20 April 2012

Colin Stewart Sinclair Lyon
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Extract

Almost a quarter of a century ago—in 1958 to be precise—one of my predecessors devoted the main part of his Presidential Address to a discussion of state and occupational pensions. He spoke at a time when price inflation was 2¾%, growth in the national income had been averaging 2% p.a. in real terms and the number out of work was half a million. The redemption yield on long-dated Government stock was about 5¼% and the dividend yield on the Actuaries' Investment Index of Ordinary Shares was 5¾%—we did not yet have the reverse yield gap that recognizes the endemic nature of inflation.

Type
Review Article
Information
Journal of the Institute of Actuaries , Volume 110 , Issue 1 , June 1983 , pp. 1 - 15
Copyright
Copyright © Institute and Faculty of Actuaries 1983

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References

(1) Redington, F. M. Presidential Address, J.I.A. 85, 1.Google Scholar
(2) Throughout this Address I use the term ‘national income’ in the sense in which it is used in the Blue Book, viz Gross National Product less Capital Consumption (i.e. depreciation).Google Scholar
(3) Redington, F. M. J.I.A., 85, 9.Google Scholar
(4) Ibid., p.7.Google Scholar
(5) ‘The growth of pension rights and their impact on the national economy’, J.I.A. 80, 141.CrossRefGoogle Scholar
(6) Ibid., p.145, Table 2, ratio of col.(5) to col.(2).Google Scholar
(7) National Insurance Fund Long Term Financial Estimates: Report by the Government Actuary (“LTFE”) (HMSO, 1982). p. 61 and Table C3.Google Scholar
(8) Benjamin, B. & Overton, E. Prospects for Mortality Decline in England and Wales, Population Trends, 23, Spring 1981, (HMSO).Google Scholar
(9) See the Social Services Committee's Minutes of Evidence on the Age of Retirement on 11 and 18 November 1981 (HMSO), p. 31, Table 4.Google Scholar
(10) Ibid., p.32. Table 5.Google Scholar
(11) L.T.F.E., p.64, Table C3.Google Scholar
(12) See, for example, J.I.A. 94, 181.Google Scholar
(13) J.I.A. 80, 153.Google Scholar
(14) Report of the Committee to Review the Functioning of Financial Institutions (‘Wilson Report’) Cmnd. 7937 (H.M.S.O., 1980). p.530, on either of the projections in paragraphs 5.13 and 5.14.Google Scholar
(15) This ignores any change in the income available to pensioners from sources other than pensions.Google Scholar
(16) J.I.A. 80, 240.Google Scholar
(17) L.T.F.E. Tables 8 and 10.Google Scholar
(18) Minutes of Evidence, p.35, Table 8.Google Scholar
(19) L.T.F.E. Table 14.Google Scholar
(20) Ibid. Table 2.Google Scholar
(21) Hemming, R. & Kay, J. A. The Costs of the State Earnings Related Pension Scheme. IFS Working Paper No. 24 (The Institute for Fiscal Studies, London, n.d.), 27.Google Scholar
(22) Occupational Pension Schemes 1979: Sixth Survey by the Government Actuary (‘OPS 1979’) (HMSO 1981), Tables 2.3 and 5.1.Google Scholar
(23) Ibid., Table 8.4; also Occupational Pension Schemes: A New Survey by the Government Actuary (HMSO 1966) Table 35.Google Scholar
(24) See note 14.Google Scholar
(25) L.T.F.E. Table 12.Google Scholar
(26) Ibid., Table 16.Google Scholar
(27) O.P.S. 1979 Table 4.1.Google Scholar
(28) J.I.A. 80, 200, shows contributions of £237m and pensions of £105m in 1952; the national income for that year was £12·8bn. O.P.S. 1979 Table 4.1 shows net growth of funds of £8.1m in 1979, compared with national income of £147bn (1981 Blue Book).Google Scholar
(29) Wilson Report, p.245.Google Scholar
(30) Ibid., p.259.Google Scholar
(31) Bain, A. D. Structural Imbalance in the U.K. Financial Markets, Bank of England Panel of Academics Consultants' Paper No. 19 (1982) at p.7.Google Scholar
(32) J.I.A. 80, 164, paragraph 83.Google Scholar
(33) Their proportion has risen from 40% to 70% of net personal wealth.Google Scholar
(34) CSO Economic Trends No.291, January 1978, p. 104; CSO Financial Statistics No.238, February 1982, Table S.12.Google Scholar
(35) Derived from Stock Exchange Fact Book (March 1982) Appendix 1.Google Scholar
(36) Inquiry into the Value of Pensions, Cmnd. 8147 (HMSO, 1981). paragraphs 83–93.Google Scholar
(37) For a full discussion, see Greater Security for the Rights and Expectations of Members of Occupational Pension Schemes: a Report of the Occupational Pensions Board, Cmnd. 86-49 (HMSO, 1982).Google Scholar
(39) de Montaigne, Essais III, xii.Google Scholar
(40) My special thanks are due to Gordon Bayley, Bernard Benjamin and Frank Redington, who read drafts of relevant parts of the Address and made many helpful comments; to my colleague, Tony Brace, who saved me from numerical errors; and to my secretary, Pauline Kite, who typed innumerable drafts and remained cheerful throughout.Google Scholar