This is the first internal actuarial report produced in relation to the forward liabilities of the welfare system. The purpose of the report is for the Chief Actuary to independently:
- Review and comment on the valuation of the forward liability and what can be learned from analysis of the change in liability
- Review overall performance of the welfare system and the effectiveness of the “investment portfolio” Identify areas for attention to assist in managing long-term benefit dependency
- Discuss material risks that could impact on successfully managing the forward liability and/or in meeting Better Public Service (BPS) or KPI targets.
The 2013 valuation is the first conducted after the welfare reform changes which commenced in the latter half of 2012 and gives the first results which include some impact from these changes. Impacts from the reform changes that commenced in July 2013 will appear in the next valuation due as at June 2014.
This report is addressed to the Chief Executive (CE) of the Ministry of Social Development (MSD) and the Board of Work and Income with the understanding that it will also be provided to the Minister of Finance and the Minister for Social Development.
An actuarial approach has been taken to measure the forward liability associated with the welfare system. The liability acts as a proxy for assessing people’s risk of long-term benefit dependency and provides a tool to assist management in working with those people.
- Reviews and comments on the valuation of the forward liability
- Reviews overall performance of the welfare system and the effectiveness of investments made to reduce benefit dependency
- Identifies areas for attention to assist in managing long-term benefit dependency, and
- Discusses material risks that could impact on successfully managing the forward liability and/or in meeting Better Public Service (BPS) or Key Performance Indicator (KPI) targets.
The report has been prepared by Herwig Raubal, FNZSA, FIAA and Eric Judd, FNZSA, FIAA and is in respect of the period ended 30 June 2013.
There are no actuarial professional standards which strictly apply to the valuation of unfunded social welfare liabilities. Where relevant, this report and the valuation calculations have been carried out consistent with the principles of professional standards of the New Zealand Society of Actuaries.
As far as we are aware, this is the first such report prepared in respect of an unfunded welfare benefit system anywhere in the world. As such, the report is in some places developmental. Further data capture and analytic processes are required to allow the full benefit of this discipline to be realised.