KGC Actuarial Fee Survey 2011: Full analysis

Jack Jones delves into the detail of the second annual Kim Gubler Consulting Actuarial Fee Survey.

The second annual Kim Gubler Consulting Actuarial Fee Survey, published this week, revealed that schemes across the board could be paying out more than two and a half times more than their peers despite increasingly competitive pricing.

It revealed discrepancies in smoothed annual costs of £37,000, £42,000 and £61,000 for schemes with 2,000, 5,000 and 10,000 members respectively.

These graphs combine the cost of annual, ad hoc, periodic, and corporate actuarial costs with a one-off cost for triennial actuarial tasks, and a valuation cost divided by three.

This enables the reader to make a comparison of the overall costs, although the survey’s author, Kim Gubler, acknowledges this ‘total cost’ is higher than most schemes will encounter as there are areas of overlap between these services.

The same scenario was costed for each scheme: 25% active, 50% deferred, and 25% pensioner members.

There was one category of member: 1/60 accrual, contracted out on reference scheme test, limited price indexation, with a basic pensionable salary; and meetings were to take place at the client’s premises.

Providers were also asked to indicate how many of 23 ‘core tasks’ were included in the quote.

Total cost – 2,000 life scheme

The most expensive quote was 2.6 times higher than the cheapest and £16,000 above the average.

This represents an increase in competitiveness on last year when the highest quote was almost four times the lowest and almost a quarter of quotes were £25,000 or more above the average.

Five of the firms offered 100% of core tasks and 11 of the 14 offered 80% or more.

Total cost – 5,000 life scheme

The top quote for medium-sized schemes was 2.4 times higher than the lowest quote and £18,000 more than the average.

This is also a smaller discrepancy than last year when the top quote was more than £70,000 higher than the lowest and £56,000 above the average.

The average cost for a 5,000-member scheme is £12,000 more a year than for a 2,000-member scheme at £56,000.

Four of the providers included all core tasks in their quote and ten of the 13 offered 80% or more.

Total cost – 10,000 life scheme

This was, perhaps surprisingly, the least competitive category, with the highest quote 2.7 times the lowest and £26,000 above the average.

The average quote was £70,000 – £14,000 more than for a 5,000 member scheme.

Last year the discrepancy between highest and lowest quotes was £93,000 with the highest quote £48,000 above average.

Four of the providers included all core tasks in their quote and ten of the 13 offered 80% or more.

The full survey can be accessed here, and last year's results are available here.