UK Pension Funds - Processes and Risk Monitoring

PFaroe is a platform developed by Moody's that enables analysis and monitoring of the risk inherent in defined benefit pension plans. Mercer uses the platform for its UK clients. At the moment, this is the only country with access to the platform, but expansion is planned for other client’s from other countries. An actuarial valuation has assumptions, which may of course not be verified over time, due to the unpredictability of the world. With PFaroe, the aim is to make the most continuous and realistic analysis possible and to manage risk. In the actuarial valuation, calculations are made that aim, based on assumptions, to calculate the present value of the company's liabilities. The cashflows calculated by the actuarial valuation are entered in the platform and used to calculate, in the Payment Schedule, the benefits to be paid monthly by the company. These benefits payments, present in the Payment Schedule, are updated in the platform when we perform the calibrations with what the fund actually paid that month, having access to the fund's monthly transactions. To compose the PFaroe's Payment Schedule we also add expenses, employee contributions, employer contributions and deficit contributions. These no longer come from the actuarial valuation but are entered into the system according to the client's wishes. During the internship I had to keep the platform updated with the most recent transactions of the fund and make a careful analysis to verify that all the values given by the system are as expected. Along with the most recent transactions, I also had the task of keeping the platform updated with the Assets provided by the investment team. After the update, calibration of the system, some of the functionalities it has were demonstrated. All these functionalities are used by the clients, who have access to their PFaroe page in a more simplified way.