[discount_rates_problem] [scalars_inappropriate] [risk_approaches]

Risk quantification is very poorly captured by scalars and there is no evidence that financial economics is useful for long-term estimates. For the last 20 years or so, there has been a huge concentration on risk without reward recognition. As far back as 1952, Redington wrote that avoiding losses is the same as avoiding profits. More recently (2018), Maurice Ewing said that risks are only taken because of potential rewards, which is entirely logical.

Further, prudence can only be identified once one has derived and explained a best estimate. Interestingly, TAS 300 (paragraph 6 on page 5) requires communications to include sufficient information to enable the user to understand the level of prudence in the assumptions and the resulting actuarial information. Further, TAS 300 (paragraph 7 on page 5) requires communications to include an explanation of, and reason for, any material change in the level of prudence from the previous exercise. Not having seen a recent actuarial valuation report, I can’t say if these requirements are now fully met but I can say that I've never seen prudence quantified before; has anyone else?

The UK long-term DB funding regime needs wholesale reform.