Pension, Gratuity schemes; Retirement / Separation Benefits for your Employees

We can help your organisation:

  • to measure the cost of your pension and gratuity schemes by actuarial valuations;
  • to study objectively whether your retirement/separation benefit package is competitive, and suggest necessary amendments, if any, working out their cost;
  • to set up or amend your retirement and separation benefit schemes, including documentation; and
  • to administer these schemes, including maintenance of necessary accounting and other records, monitoring investments and suggesting appropriate investment strategy.

The seed of this work was sown in 1966. A major UK-based multinational had a pension scheme in Pakistan since the early 1950’s. The scheme was insured and administered by the Pakistan branch of a leading UK life insurer. At the suggestion of a young Pakistani executive, and with the blessing of the UK Head Office, the company decided in the 1966 to withdraw the scheme from the insurer and self-administer it. It contacted Saiyid Saeed Akhtar to negotiate the withdrawal, and he became the scheme’s Consulting Actuary.

By the Grace of Allah, pension consultancy has expanded greatly. The expansion was driven by competition among top employers to attract good personnel. Also, employers realised that without pension and gratuity schemes, their employees would suffer a big drop in income when they retire. Another incentive is their tax-effectiveness. With negligible exceptions, pension schemes are self-administered with the help of consulting actuaries. Two or three did insure to start with, but change to self-administered.

A strong boost was given to our practice by the Income Tax Ordinance, 1979, which introduced Approved Pension and Gratuity Funds, and provided tax incentives to employers and employees to set these up.

For defined benefit pension and gratuity schemes, accounting standards require periodic actuarial valuation and certification of cost of such schemes, irrespective of whether or not they are funded. These standards include the FAS 87 in the USA and FRS 17 in the UK. The international Accounting Standards Board introduced International Accounting Standard 19, which the SECP Authority has made applicable to Pakistani companies. All this encouraged our practice in the retirement benefits field. Today, we make IAS 19 calculations for companies in Pakistan, FAS 87 calculations for the Pakistani subsidiaries / branches of US companies, and FRS 17 calculations for UK companies.

Administration of Provident Funds

If your organisation has a Provident Fund, and you would like to out-source its administration, we can take this over to enable you and your accounts department to concentrate on your main business.

Some leading employers have decided to out-source their Provident Funds to us. Others have taken our actuarial advice on the correction allocation of investment income to members.
Another important area is to project the estimated benefits of the Fund.

Life Insurance

If you are a life insurer in Pakistan or another country in the region, we can help you to:

  • devise life insurance plans to offer to your customers. These include conventional policies, and also modern unbundled and state of the art polices
  • calculate and certify premium rates and cash values;
  • carry out periodic actuarial valuations, with bonus recommendations;
  • study the embedded value of your portfolio; value the proprietorship interest;
  • measure field productivity and persistency, and work with you to improve these;
  • monitor your expenses;
  • make financial projections to your life fund and the flow of money to and from the life fund to shareholders;
  • negotiate reinsurance treaties; and almost all other practical and actuarial aspects of the work.

Likewise, if you are thinking of starting a life insurance operation, we can do feasibility studies, assess the capital requirements and prepare a business plan.

We have a long and deep involvement in life insurance. Up to 1972, the founders of the firm had a large life insurance practice in Pakistan, advising the American Life, Habib Insurance, Ideal Life, New Jubilee, Premier and others. In addition, they served on or chaired various committees set up by the Insurance Association of Pakistan, Government and the Life Insurance Management Board.

The State Life Insurance Corporation of Pakistan was set up in the year 1972, replacing the numerous private companies. Whether as member of State Life’s board or as Consultants, the firm’s actuaries played a leading part in advancing State Life on all aspects of its operations, including actuarial, investment, administrative and marketing; and set up State Life’s Overseas Division.

They developed the Shad Abad plan, which proved to be Pakistan’s most successful new life insurance product ever. They popularised the Family Income Benefit Rider. These plans have increased the life insurance in force by billions of rupees. They led the liberalisation of the Non-medical Scheme and the Female Under-writing rules. These two things enabled life insurance to grow all over Pakistan, including the rural areas, and enabled the Jeevan Sathi Plan to progress. They also designed the Personal Pension plan. And in December 1995, they designed the innovative and state-of-the-art Sunehri Plan.

They looked after State Life’s investment portfolio at a critical time, and worked closely with the Finance Ministry to evolve the ‘Special Government Bond’, which improved both the yield and match between assets and liabilities. Other steps were also taken to improve State Life’s investment portfolio.

From 19 May 2000 to 18 May 2003, Samee-ul-Hasan took leave from the firm to serve as Chairman and Chief Executive of the State Life Insurance Corporation of Pakistan. State Life has over 85% of the life premium income in Pakistan. Alhamdulillah, during his Chairmanship, there was a marked improvement in overall performance and morale. Basic reforms were carried out, and new operational systems were introduced in the field and office. Major right-sizing took place in the office and Field. As a result, New Business and Persistency improved considerably both in Pakistan and the Gulf, and the Expense Ratio came down substantially. New computers were installed in all individual life Zones in Pakistan, and in the Gulf Zone.
State Life's Funds grew to Rs 85 billion at book value as at end of the year 2002. The market value was very much more.

National Pension Schemes; Social Security

We can help Governments and other official bodies to make actuarial valuations and projections of their national pension and social insurance schemes, and health schemes. We can also help to design and amend such schemes.

Pakistan’s embryonic National Pension Scheme is the EOBI scheme. We have been closely associated with this from its inception in 1976. The major changes in 1986 were designed by us, under which the minimum pension was raised sharply to a meaningful level. We have conducted several valuations of the scheme and introduce major reforms to improve the scheme, and our active association continues.

We have carried out valuations of the Sindh Provincial Social Security Scheme. We carried out field studies as to the rates of hospitalisation, length of hospitalisation and the frequency of medical consultation.

Other Areas

Here are other areas where we can help your organisation, based on our past experience:

  • we can help your organisation to review its non-life insurances, covering material damage, consequential loss and liability insurances.
  • we can help you to set up workable and sound medical schemes for both serving and retired employees, and to estimate current and deferred costs.
  • In many countries, non life insurance companies now use actuaries heavily. Some countries require actuarial certification of non-life insurance loss reserves. We have advised on loss reserves of the Pakistan Insurance and the National Insurance Corporations, and on non-proportional reinsurance. If you are running a non-life insurance organisation, we can help you in these areas.
  • Finally, if you are running a modaraba or leasing company, we can help you to devise appropriate leasing systems and to make financial projections.