To be updated with my own reply later today, but I know I have other actuary-readers who might be willing to chime in . . .
I am a sophomore at Olivet Nazarene University in Bourbonnais and am triple majoring in actuarial science, mathematics, and accounting. As a student in the Honors Program, I will be conducting research on a topic of my choice. I am interested in pursuing pension consulting , but as a second year student, feel a little ill-equipped when brainstorming about a specific trajectory for my research. Is there anything that comes to mind?
My correspondent then mentions some possible topics but was hoping, in particular, for some ideas that would be connected to the actual work of a pension actuary.
So:
first of all, what research topic(s) can readers suggest?
And, second, what do you think of the future of actuarial careers?
UPDATE:
This has sat long enough.
My first thought: did you see Megan McArdle’s article on the future of journalism? She basically said, “don’t try to get my job — because my career path was so unlikely and there are so few such jobs out there it’s foolish to try.”
I’m not going to say this, exactly, but you should know that even in my relatively short (17.5 years) career, defined benefit pension plans have gone from the norm for large employers, to very nearly only available for grandfathered groups, unions, and government workers. I cannot stress enough how dramatic and how fast this change has been — and it seems that we, as pension consulting actuaries, are accelerating it by promoting lump sum offerings and annuity purchases for frozen benefits, putting ourselves out of business for short-term gains in consulting fees. (I say this because I assume all pension consulting firms are doing the same thing, so I don’t believe I’m announcing the identify of my employer.)
We are still hiring actuaries. There are still companies who say they intend to keep their plans — maybe about 1/4 of large employers, the last time I looked at the numbers — and the general belief is that everyone who wants to close their plans, has already done so, so that this 25% figure may be relatively stable. But then again, all it takes is for new management to come in, at any given company, and closing a plan isn’t an action which is ever un-done by reopening it later.
But, of course, the number of actuaries needed to value and consult on the smaller number of DB plans is, well, smaller, especially since everyone is also using “offshore” or “val center” models to move the core valuation work to specialized, and lower-paid, teams (lower-paid either by being based in India, or by the fact that the work is done by “analysts” not on the actuarial student track, and only checked by qualified acturies). Many of our actuarial students move on to consulting on Defined Contribution plans, or investment consulting, or other specializations, after gaining initial experience with pensions.
On the other hand: people still have to retire, and my belief is that the 401(k) plan is simply not a viable long-term replacement for pension plans. Some of my colleagues acknowledge this, and there are efforts to develop an alternative, something that relieves the employer of risk that they’re not willing to bear any longer, without placing everything on the employee.
Alternatively, another option that may gain traction is an “everything old is new again” annuity, though there’s a huge distrust among the general public, and not without reason, as commission fees and anti-selection make them pretty pricey.
So as far as research goes, I’d focus on the future of retirement, starting with the Society of Actuaries Post-Retirement Needs and Risks research project, and see where it takes you.
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