The social security organization follows a well-defined reporting process with respect to the actuarial valuation of a social security scheme.

A legislated, well-established and well-defined reporting process is a vital part of the good governance procedures for social security programmes. This guideline should be read together with Guidelines 1 and 43.

The board (if any), management of the social security institution and the actuary communicate clearly and effectively. This exchange of information improves management but doesn’t negatively impact the independence of the actuary.

A well-defined reporting process is a vital element of good governance for social security schemes. Actuarial and financial reports based on sound data, assumptions and methodology contribute to the financial sustainability of schemes. Information presented in such reports can send “early warning signals” if a scheme is experiencing difficulties; it can identify short-term and long-term trends that have a potential to make the scheme unsustainable, and, as a result, trigger public and other stakeholder consultation regarding the sustainability of the scheme.

The actuary inputs into the investment reporting process to ensure that information disclosed is accurate and presented in an appropriate way. The actuary also provides input into the decision-making process in respect of what information to disclose.

The social security institution involves the actuary in the processes which determine an appropriate value to place on the scheme’s assets.

Placing an appropriate value on assets is important and may be required for a number of different reasons, including the need to assess the financial situation of a social security system and to determine benefit amounts.

In certain programmes, the value of benefits of current and/or future beneficiaries is directly or indirectly related to the value placed on assets.

The social security institution involves actuaries in different areas of the investment process. This guideline refers to the situation where actuaries are directly involved in the design and carrying out of an investment strategy in respect of the reserve funds of the social security scheme.

The social security institution ensures that the scheme liabilities are taken into account in the investment process.

The requirements for actuarial input and the role of the actuary are clearly defined in the investment governance framework.

Governance refers to the process of decision-making, control and monitoring of the processes carried out by an organization. Its aim is to ensure risks are known and managed effectively as well as improving efficiency of processes.

Although financing policy varies by social security institution, many systems will have reserve funds that require effective management, whether these have a short or longer term time horizon. As populations age and the external investment environment becomes more complex, the importance of a well-managed reserve fund increases. Increasing focus on investment governance is likely to continue and professionals involved in the investment process need to ensure that their input is carried out appropriately.

The social security institution applies automatic adjustment mechanisms in accordance with the laws and regulations governing the scheme. The social security institution analyses how the application of these adjustment mechanisms affects benefit adequacy and/or the financial sustainability of the scheme.

Automatic adjustment mechanisms link certain decisions on benefits and financing to internal or external parameters or indicators. This guideline should be read together with Guideline 43.