A presentation to first year students of the LSE attending their actuarial group.

1. WHAT ARE
ACTUARIES
GOOD FOR?
LSE Old Building – 11th October 2016

2. PAST
Expelled from School
Read English at Cambridge
Worked on a trawler
Sold insurance
Head of Sales at Zurich
FUTURE
Director of First Actuarial
Founder of
www.pensionplaypen.com
Blogs at www.henrytapper.com
@henryhtapper
07785 377768
HENRY TAPPER (PENSION PLOWMAN)

3. WHY BECOME AN ACTUARY? (WHAT AN ACTUARY WOULD SAY)
3
Reward
Variety
Influence
Intellectual
satisfaction
Network
Support
International
opportunities
High
standards

4. WHY BECOME AN ACTUARY? (WHAT I SAY)
4
5. Diversify
and
conquer
3.
Democratise
Pensions
4. Aid
Freedom
and
choice
6.Price
Insurance
7. Work
for us
8. Win your
quiz night
1.Change the
world
2.Manage
the
message

6. CHANGE THE WORLD!

7. CREATE GENERATIONAL FAIRNESS!

8. MEASURE MORBIDITY

9. FEED THE HUNGRY

10. PREDICT PANDMEMICS

11. UNDERSTAND CATASTROPHE
How can we better understand these risks and manage them

13. MANAGE THE MESSAGE

14. DESTROY TRUMP

16. AN AUTO-ENROLMENT CAPACITY
SOLUTION

17. MANAGING THE DIFFERING BEHAVIOURS

18. PENSION A PENSION

19. QUOTES FROM PROVIDERS
As well as viewing these quotes online you can download them along
with factsheets on each provider as a PDF.

20. DETAILED GUIDANCE ON EACH PROVIDER

21. REPORTS AND DUE DILIGENCE
Once you have completed your work and chosen a pension you will get an
actuarial certificate from First Actuarial. This certificate warrants that you have
followed due process and chosen your pension with due diligence. Along with this
you can download your pension offers and workforce assessment.

23. WHAT’S HAPPENING AT RETIREMENT?

24. CHAMPAGNE MOMENTS DOUBLE IN A GENERATION!

25. WE’VE GOT FREEDOM AND CHOICE!

26. BUT WHAT CHOICES DO WE REALLY HAVE?

27. THE PERILS OF DRAWDOWN

28. 28
with the tax muppetometer

29. 29
with the tax muppetometer

30. 30
with the tax muppetometer

31. 31
The small print
We have used 2015/2016 tax allowances, ignored investment returns and inflation and
not tried to predict how HMRC might bend the rules in the future, which they
undoubtedly will. Allowing for these might change the numbers a bit, but would also
make the model less user friendly although we doubt the underlying messages would
change. Namely, spreading your DC pot over a number years will, for most people,
mean paying less tax.
with the tax muppetometer

33. INVESTMENT A – MARTIAN PRIVATE EQUITY
0%
2%
4%
6%
8%
10%
12%
14%
16%
1 2 3 4 5 6 7 8 9 10
Return–ri
Year
Return on Investment A
Return each year Average return - μ
The annual sample
standard deviation
for this investment
is 7.4%
Standar
d
Deviatio
n
Expected Return =
7% pa

34. INVESTMENT B – LSE BONDS
0%
2%
4%
6%
8%
10%
12%
14%
16%
1 2 3 4 5 6 7 8 9 10
Return-ri
Year
Return on Investment B
Return each year Average return - μ
The annual sample
standard deviation
for this investment
is 3.2%
Standar
d
Deviatio
n
Expected Return =
3% pa

35. THE MATHS
LSE Bonds
Expected return:
𝜇 = 𝐸 𝑟 =
1
10
𝑖=1
10
𝑟𝑖 = 3%
Sample Standard Deviation:
𝜎 = 𝑖=1
10
(𝑟𝑖 − 𝜇)2
9
= 3.2%
Martian Private Equity
Expected return:
𝜇 = 𝐸 𝑟 =
1
10
𝑖=1
10
𝑟𝑖 = 7%
Sample Standard Deviation:
𝜎 = 𝑖=1
10
(𝑟𝑖 − 𝜇)2
9
= 7.4%

36. Investment A -
Equities
Investment B - Bonds
0%
1%
2%
3%
4%
5%
6%
7%
8%
0% 1% 2% 3% 4% 5% 6% 7% 8%
ExpectedReturn
Standard Deviation
Expected Return vs. Risk

37. 50% EQUITIES AND 50% BONDS
0%
2%
4%
6%
8%
10%
12%
14%
16%
1 2 3 4 5 6 7 8 9 10
Return on Investment
Return each year Average Return
The annual sample
standard deviation
for this investment
is 2.1%
Standar
d
Deviatio
n
Expected Return =
5% pa

38. THE MATHS
Expected return:
𝜇 = 𝐸 𝑟 =
1
10
𝑖=1
10
𝑟𝑖 = 5%
Sample Standard Deviation:
𝜎 = 𝑖=1
10
(𝑟𝑖 − 𝜇)2
9
=
5 × (7% − 5%)2 +5 × (3% − 5%)2
9
= 2.1%

39. Investment A -
Equities
Investment B - Bonds
50/50 split of
investments
0%
1%
2%
3%
4%
5%
6%
7%
8%
0% 1% 2% 3% 4% 5% 6% 7% 8%
ExpectedReturn
Standard Deviation
Expected Return vs. Risk

40. Investment A -
Equities
Investment B - Bonds
50/50 split of
investments
0%
1%
2%
3%
4%
5%
6%
7%
8%
0% 1% 2% 3% 4% 5% 6% 7% 8%
ExpectedReturn
Standard Deviation
Expected Return vs. Risk

42. INSURANCE PRICING CONSIDERATIONS
Factor
3
Factor
1
Factor
2
£££
Age
Sex
Type of
Car
Where
kept
Alarm
Mileage
Endorse
ments
Marital
Status
Job
Home
Address
No
Claims
Policy
Type
Multi-
Car
Excess
“Pass-
plus”
Use

43. 0%
5%
10%
ProbabilityofAccident(pa)
Age
Risk vs Age of driver

44. AccidentFrequency
Size of Claim
Frequency of different sized claims - 20
year old
AccidentFrequency Size of Claim
Frequency of different sized claims - 50
year old

45. ExpectedClaimSizepa
Age
Expected Claim size vs Age
Probability of
claim
X
Expected size of
claim

47. WHAT DO EMPLOYERS WANT?
– A good academic record – usually a maths A level at Grade A*, A or B, and a
2:1/1st at degree level
– Work experience/internships
– Good communication skills
– IT skills
– An interest in business/relevant industry knowledge
– Commitment to the exams and your career
– Enthusiasm

48. MY TIPS
Try and get Work Experience
 In my opinion, more important than a First Class Degree
CV and Covering Letter
 Well presented
 Clean, clear language
 Checked by someone else
Interview
 Be prepared… smile… ask questions… enjoy yourself

49. WHO SHOULD YOU WORK
FOR?
– First Actuarial LLP
– Pension Consultancy Services
– Young and Growing
– Offices in Basingstoke, Leeds,
Manchester, Peterborough, Tonbridge Basingstoke Tonbridge
Peterborough
Leeds
Manchester

50. ANY QUESTIONS?

51. WHERE CAN I FIND OUT MORE?
Visit: www.actuaries.org.uk/becoming-
actuary
E-mail: careers@actuaries.org.uk
Facebook: www.facebook.com/Actuarial
IFoA brochures
Comments
QuestionsOR…
Speak to your Careers Adviser
Contact a Careers Ambassador - www.actuaries.org.uk/becoming-
actuary/pages/career-ambassadors

53. 1) What was the total deficit of all UK defined benefit pension
schemes at 30 June 2014?
A: £200m
B: £200bn
C: £200trn

54. 2) What is your State Pension Age?
A: 62
B: 65
C: 68

55. 3) Roughly how much would a 22 year old graduate trainee, aiming to
retire at 65 on an annual pension of £30,000, need to save a month?
- assume 6% investment return a year
- cost of purchasing an annuity at 65 = £30 buys £1pa pension
A: £400 per month
B: £600 per month
C: £800 per month

56. 4) What age is a woman currently aged 21 expected to live until?
A: 87
B: 90
C: 93