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.

Where it is the responsibility of the actuary, he or she uses appropriate methodology and assumptions to determine the conversion factors of lump sums to income. Unless these factors are set so as to meet specific policy objectives, they are determined as cost-neutral. If the factors are not cost-neutral, the actuary discloses this fully and determines and reports on the implications on adequacy and sustainability of the scheme.

The social security institution or other governing institution plays a role in the monitoring and surveillance of defined contribution schemes, as appropriate.

The rate of return to be credited to notional accounts is determined in accordance with the laws and regulations governing the scheme. The actuary ensures the correct application of the rate and performs related calculations to assess the adequacy and financial implications of returns credited.