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Actuarial work for charities
Pete McGurk from Barnett Waddingham's Life insurance consultancy team in our London office writes:
Most people associate actuaries with number-crunching work for pension schemes and insurance companies (if they associate us with anything at all!). However, this doesn't tell the whole story. The profession's skills are used in other areas where uncertain future events have financial implications - indeed the profession's official byline is "making financial sense of the future".
One such area where Barnett Waddingham apply our skills is in helping charities understand the financial implications of the help they provide to beneficiaries. Of course, some charities have pension schemes for their employees and actuarial advice is needed in this area, but here I am talking about the core work of the charities. A charity may provide direct financial assistance or incur a cost in providing some sort of help or benefit to a person in need. In some cases, the charity may feel that it has at least a moral obligation to continue that support over the longer term, perhaps for the remainder of a person's life or until recovery from an illness.
Questions that arise from this can be:
- What reserve should be set aside to meet the future costs for current beneficiaries?
- What is the average cost of providing the benefit to a new person?
These sorts of questions are ones that actuaries are equipped to answer. Of course, the charity need not spend its money on people - it could be animals, for example. The common factor will be an uncertain, usually long-term, financial obligation to which our statistical and financial skills can be applied.
A charity may also be considering expanding the range or scope of the benefits or help it provides. Actuaries can advise on the financial implications and risks of the expansion including suggesting methods to control risks and costs.
Examples of projects carried out are:
- A large charity required advice on the costs of a scheme to provide regular visits to people with learning disabilities following the death of their parents.
- A trade-based charity needed a quantification of the reserve needed to provide continuing financial support to retired tradespeople in need.
- A religious charity required advice on the financial implications of providing long term care to a sisterhood of nuns.
If you have any queries on projects for charities (other than employee pension schemes which can be dealt with by any Barnett Waddingham UK office), please contact Pete McGurk or Rajeev Shah in our London office.
Pete McGurk, August 2001.