In contrast to auditors, actuaries have played a key role in the development of Australia’s superannuation industry.
Wayne Walker, a director at Rice Walker Actuaries, notes that “most adviser firms have their origins in actuarial services. At one stage they moved into asset consulting, administration and even legal advice. The actuarial profession was highly successful in extending the services to super funds”.
This relationship has now changed with the advisers now heavily focused on selling products and services. The consequences of this, adds Walker, “is that the big advisor firms no longer have an ability to give super funds truly independent advice. The need for genuine (independent) super advice has resulted in demand for consultants”.
Walker expects the standard actuarial role to change and diminish with the decline in defined benefits.
“But those actuaries with specialist knowledge can add value in areas such as investment, risk management and human resource strategy.”
Martin Stevenson, vice president of the Institute of Actuaries of Australia, expects the decline in defined benefits to lead to a greater actuarial involvement in defined contribution funds where “many members have no idea of their end benefits”.
For defined benefit funds, he highlights changes that will be needed when the International Accounting Standards (IAS) are introduced next year. IAS 19 covers accounting standards for employee benefits, including superannuation.
“The introduction of IAS 19 is likely to have a significant impact on the preparation of financial accounts of employers sponsoring defined benefit superannuation funds,” Stevenson says.
“As well as actuaries doing the necessary valuations for determining IAS 19 amounts for balance sheet and profit and loss purposes, actuaries are likely to be involved in assisting employers to determine if there are any effective strategies for dampening the volatility brought about by changes in the superannuation fund’s financial position.”
Stevenson adds that Australia’s current accounting standard for employee benefits makes specific reference to defined benefit superannuation arrangements in relation to the information that must be disclosed in the notes to company accounts.
“However, it does not specify how superannuation should be recognised or measured for inclusion in income statements and balance sheets.”
Stevenson points out that the Australian Accounting Standards Board (AASB) has proposed one change to IAS 19 in respect of corporate funds for its adoption in Australia in 2005.
“It has recommended that actuarial gains and losses arising during a year are recognised immediately in superannuation expense, rather than being amortised over future years.”
Another opportunity Stevenson identifies for actuaries is in making effective APRA’s requirements for licensed funds to have a Risk Management Plan and Risk Management Strategy.
Finally, Stevenson anticipates actuarial involvement in developing social policies around Australia’s ageing population.
The Institute of Actuaries of Australia, confirms Stevenson, has formed a group to develop positions in this debate.
