Office of the Superintendent of Financial Institutions
The Office of the Chief Actuary (the OCA) is required by legislation to produce at least every three years the actuarial report that assesses the sustainability of the Canada Pension Plan (the CPP). The Chief Actuary is solely responsible for the content of the report as well as for the assumptions used.
The OCA follows a well-documented and clear assumptions development process.
The transparency of the valuation process enhances the independence of the Chief Actuary.
The current challenging demographic and economic environments in which retirement income systems operate are putting an additional premium on the professionalism of the Chief Actuary and on his/her being, and perceived to be, fully accountable and professionally independent.
Since the actuarial report on the Canada Pension Plan is one of the key input to the triennial financial review of the CPP by Ministers of Finance (please refer to the Good Practice "Financial review of the Canada Pension Plan"), it is of paramount importance that the Chief Actuary uses his/her best-estimate assumptions and these assumptions are well researched and justified. Secondly, the Chief Actuary needs to maintain his/her independence is doing so.
The Chief Actuary needs access to relevant knowledge in order to develop best-estimate assumptions. He/she needs to consider opinions of independent experts and analyse the economic and demographic environments. Moreover, in accordance with the law and professional standards, the Chief Actuary is responsible for assumptions he/she develops. Consultations with experts enlarge the Chief Actuary's knowledge and expose him/her to a wide range of opinions. Further, the external peer review process, which includes a peer review of developed assumptions, assesses the reasonableness of assumptions and provides the Chief Actuary with suggestions on how to improve his/her work.
The openness of the assumptions development process makes political interference as well as undue influence on the Chief Actuary judgement impossible. This openness is achieved through
Taking full professional responsibility for the work and being independent doesn't mean working in isolation and without controls. The approach adopted by the Office of the Chief Actuary is that openness and cooperation are the best ways to ensure professionalism and independence. Considering a wide range of opinions, being open and transparent, and maintaining internal and external controls allow the Chief Actuary to fulfill his/her mandate in a professional and independent manner.
The resources and inputs have been used in an optimal way to achieve the set objectives and the expected outcomes.
The professionalism and independence of the Chief Actuary has been recognized in several ways. Below are some examples.
The 2014 Federal Budget stated:
"The Office of the Chief Actuary provides vital and independent actuarial advice with respect to the Canada Pension Plan, public sector pension arrangements, and other social programs for which the Canadian taxpayer is a stakeholder."
The Auditor General of Canada's Spring 2014 Report to Parliament further emphasised the independence of the Chief Actuary:
"The OCA determines the demographic and economic assumptions for funding valuations, which occur every three years, in an independent manner. All actuarial assumptions used are best-estimate assumptions made by the OCA. We found that the Secretariat, National Defence, and the RCMP
[various government agencies] respected the independence of the Chief Actuary."
As of 2015, six independent peer reviews of the CPP Actuarial Reports had been conducted. All these reports opined that the assumptions used by the Chief Actuary are reasonable. Further, the reviews praised the OCA's competence, commitment and professionalism. The Review of the 26th Actuarial Report on the Canada Pension Plan stated that the Chief Actuary and his staff "were unfailingly helpful in clarifying issues raised by the review panel and in providing additional information".
It has been learned that professionalism and independence are enhanced by open and transparent processes. This good practice will be beneficial to other social security institutions responsible for assessing the financial status of social security programmes. This Good Practice could also assist social security institutions in compliance with ISSA-ILO Guidelines on Actuarial Work for Social Security Institution, especially with Guideline 2 "Assumptions", and section D guidelines on Communication and Disclosure.
This submission is to be accompanied by slide presentation, which can be found at the following link: http://www.osfi-bsif.gc.ca/Eng/Docs/ab20160413_slides.pdf
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