A new twist in the outsourcing game is Price WaterhouseCooper’s Pensions Counsellor, a software system that integrates administration and actuarial valuations. “We find that pension schemes can take two approaches to this,” says Ian Bowles, a partner who runs the European actuarial, benefits and insurance practice in London.
“We tell them it is an actuarial system that also does administration, but probably most of our client wins have been schemes who came to outsource pension administration and found we integrated the valuation system and asked us to become the actuaries as well.” Actuarial assessments, including accounting reserves, can be available at the same frequency as a company obtains other business information.
The system provides the standard actuarial valuation that is used throughout PWC, he says. “So we can use it in standalone mode, even if the firm does not do the administration. This enables a scheme to do as frequent valuations as they want. “When ACT was abolished in the UK, clients wanted to know the impact, all they had to do was press a button.” The system he points out is only as accurate as the latest data provided to the firm. “You can have monthly valuations if you want. We do not do a full, formal, statutory valuation on this basis, but we do show a page of printout showing a graph. People can keep their finger on the pulse and they do use it in that way.”
Currently, the firm says the demand has been so strong, that it has difficulty in keeping up with it. “In fact, we had to slow things down and not take any new business in some areas, because of the significant number of successes.” Bowles reckons that over the last six to nine months they have had income from the ystem generated at £1.5m, and a similar amount in the 12 months before that. Clients pay an installation fee and pay an annual service amount. The initial payment is designed cover preparing the data for the system.
“We believe the system to be unique still,” he says. “But I do not believe we will be the only ones for much longer.”
With the web, theses areas are changing rapidly, says Bowles. “This could lead to clients talking to machines, without consultants in the middle, as part of the trend to more direct interface.”
The plan is to provide services on a global basis with data and valuation basis. “The difficulty is that in Europe Middle East and Africa, you are talking about 97 different countries! No one system can work globally. But to the extent we can do it, we will certainly be servicing out multinational clienmts on a global basis,” says Bowles.
From Siemens Financial Services in Munich another approach to the topic. “We have taken a fresh look at asset allocation. We teamed up with Princeton University to reinvent the asset allocation process starting from asset liability modelling and carrying through to structuring plans for companies within our group,” says Wolgang Lotze of Siemens.
He says the tool was developed with Professor Mulvey of Princeton, in order to examine the asset and liability look at both the asset and liability side of the pension equation. “Many of the old systems have made assumptions about the stability of liabilities. Our system does not.”
Lotze goes on to says: “Traditional ALM tools have assumed the liabilities to be static. Effectively, pension liabilities are sensitive to interest rate changes, to wage inflation, and to developments within the economy.” Any change in liabilities has substantial implications for the composition of the assets. “Our systems allows both sides of the equation to be modelled.”
The system is being used with Siemens group schemes initially and to create strategic partnerships. Lotze adds: “The days are over where you can walk in to clients and say ‘here is your asset allocation 55% equities and 45% bonds, now go ahead and structure your plan accordingly’.”
Up to now, ALM studies were performed by actuaries or asset managers without incorporating the lates findings on both sides of the equation, and without incorporating the latest findings of the research in portfolio and capital markets theory, says Lotze. The group intends making the product available outside the group to other pension plans.

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