Baseline

  • Income protection in old age is the most widespread form of social protection, with 77.5 per cent of people above retirement age receiving a pension. More than half of these pensions are provided through contributory social insurance scheme. Pensions are long-term promises and the sustainability of pension systems can be challenged by population ageing, stagnating real wages, the growing informality of labour markets and the emergence of new forms of employment. Today, the reform of social security pension systems represents the biggest share of ongoing and planned social protection reform processes.

  • Social health protection is the second most widespread form of social protection, with approximately two thirds of the world’s population covered. This proportion falls to only one third and one fifth in lower-middle-income and low-income countries, respectively. As reiterated by Member States during the 109th Session of the International Labour Conference in June 2021, the extension of social health protection is therefore a priority in order to improve access to care, avoid impoverishment and improve productivity.

  • Good financial governance is of the utmost importance to ensure the sustainability and adequacy of benefits of these social protection schemes. The ILO is receiving an ever-increasing number of requests from its constituents and social security institutions for technical assistance on actuarial valuations of pension and social health protection schemes, including capacity-building on actuarial valuations.

Approach and Technical Support

Rooted in Recommendation No. 202 and relevant Conventions (Nos. 102 and 128) and Recommendations (No. 131), the sustainability of social protection systems is one of the core ILO principles, together with the universality of coverage and the adequacy and predictability of benefits. To achieve sustainability, Convention No. 102 requires that Member States shall ensure that the necessary actuarial valuations concerning financial equilibrium are made periodically and, in any event, prior to any change in benefits or contributions rates. All social insurance laws provide for statutory periodical actuarial valuations every three to five years. Obviously, actuarial valuations should also be conducted prior to the establishment of a new social protection scheme. The ILO approach to good financial governance through actuarial valuations is to find the right balance between financial sustainability and the other ILO core principles.

The ILO’s approach in providing technical assistance on actuarial valuation is not limited to delivering a report on the actuarial valuation. When the capacity and the interest are there, the approach is also to build social security institutions’ staff capacity to conduct actuarial valuations themselves, completely or partially under the supervision of ILO experts.

The ILO articulates its support on actuarial valuations through the Actuarial Services Unit (ASU), which has qualified actuaries in both the Geneva and Bangkok offices, as well as the Public Finance, Actuarial and Statistical Services Unit (PFACTS), which is responsible for development and maintenance of the actuarial valuation tools, as well as training in their use, and employs economists and statisticians to support actuarial valuations.

The ILO offers a wide range of technical support for actuarial valuations, from conducting a peer review of an actuarial valuation conducted by a social security institution to supporting an institution to develop its own actuarial unit to conduct actuarial valuations. Technical support on financial governance may also include support for the development of funding and investment policies and the development of investment structures and management.

The ILO has been providing actuarial services to social security institutions and governments in its Member States since the 1940s. It has the unique capacity to deliver technically sound and neutral advice that is recognized by all social partners based on an internationally accepted framework of ILO standards on social security. The ILO value-added on actuarial valuations is based on the following assets:

ILO Standards
  • ILO reports on actuarial valuations usually include an analysis of the compliance of the provisions of the social security law with Convention No. 102.
  • Actuaries consider the social security principles contained in relevant ILO standards when performing an analysis
Proven methodology
  • ILO actuarial valuations and investment policy and management structure analyses comply with International Actuarial Association's standards, ISAP-2, ILO-ISSA guidelines on actuarial work for social security, CFA Institute standards and ISSA guidelines on investments
Vast pool of seasoned international experts
  • Most of these experts have collaborated with the ILO for many years and are very knowledgeable about the ILO social security principles
  • This vast pool allows the ILO to respond in a timely manner to the increasing number of request made for technical assistance
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    ILO Experts

    André Picard

    Cristina Lloret

    actuarial valuation model projections
    • actuarial valuation
    • model
    • projections
    • Financial governance and sustainability/ actuarial valuations

    19.08.2022