Valuation of final-salary pension schemes

1.1 On coming into pensions consultancy after many years in a life office I looked for an indication of current thinking on the valuation of funded pension schemes. Official guidance by the profession is confined to the 1969 booklet from the Institute and Faculty; the memorandum on professional conduct concerns itself with independence and how we present ourselves. The Institute's examination textbooks pass over the main objectives lightly and concentrate on detail. While there have been papers on many aspects of pensions, they all seem to skirt the fundamental principles of valuing final salary schemes.

1.2 This paper attempts to go some way to filling the gap. It provides an opportunity to review and discuss current practice. I have found it particularly illuminating to compare the way in which practice between the United Kingdom and North America diverges.