19. The transfer of work on the insurance industry
to the FSA in April will reduce GAD's staffing level and income.
GAD told us that it had "reviewed its future work programme
to ensure that the anticipated future financial position remains
reasonably stable" and reduced accommodation costs by moving
to a different building in order to remain financially viable.
Even after the change, GAD will employ more staff than it did
in April 1999, and 65 per cent more than it did in 1989.
GAD was keen to stress that it could cope with the loss of its
insurance division by finding new sources of work, both from existing
and new clients. The department said "there has never been
any shortage of work to occupy as many professional staff as we
can recruit, even with active, and virtually continuous, recruitment
Work for overseas clients has been identified as a particularly
promising area for expansion.
20. GAD already provides actuarial advice to a number
of public sector bodies overseas, including in Greece, Cyprus
and Gibraltar on public sector pensions, in China, Greece and
Jordan on demographic projections, and in Russia, Lithuania and
Bahrain on the supervision of insurance firms.
This work currently accounts for around 15 per cent of GAD's workload,
a proportion that will increase from April.
Mr Daykin told us that "the fact that we are the Government
Actuary's Department of the UK is a selling point overseas because
governments in other [countries] are quite interested in the idea
of using our services rather than a firm that is operating for
profit because they see us as specialists in the area of social
security, pensions policy and financial services regulation".
GAD has recently established a unit dedicated to overseas work,
to focus on gaining more work of this sort and to help manage
occasional conflicts of interest with GAD's UK work.
As well as helping GAD earn extra income, Mr Daykin emphasised
that "the experience that is gained from doing overseas work
can be very beneficial both for the staff and also for our clients
in the UK in terms of the better understanding we gain of worldwide
21. GAD competes with private sector actuaries to
win contracts for overseas work, but is not able to make a profit
as it is currently constituted.
Although this may help GAD secure work, Mr Daykin identified the
organisation's "unique selling point" as being a centre
of expertise on public sector actuarial work.
There may be scope for GAD to market its services overseas on
a more commercial basis than hitherto, so as to earn more fee
income and to allow it to market itself more professionally abroad.
More commercial freedoms in relation to overseas work might help
GAD overcome the loss of its UK insurance work and permit the
department to offer more generous remuneration packages to its
actuarial staff, an issue we return to below in the context of
We recommend that the Government review the scope for GAD to
be given more commercial freedom to pursue work overseas.
22. UK Government departments are allowed to seek
actuarial advice from other sources, including private sector
The transfer of insurance work to the FSA shows how GAD is subject
to competitive pressures in the UK, at least to an extent. Mr
Daykin told us that outright privatisation of GAD had been considered
and rejected in 1989.
The arguments against privatisation then were that there might
be conflicts of interest between the work undertaken by private
sector firms for the Government and for other clients which would
not affect GAD, with its public sector focus; GAD "provided
extremely good value for money"; and that GAD was "trained
and equipped to provide services to Government in the areas where
it particularly needs those services which do not in all cases
correspond directly to the sort of work which might be done by
most actuaries in the private sector".
There may be merit in re-examining GAD's status, to ensure
that the Government continues to get the best value actuarial
23. GAD identified the recruitment of actuaries as
one of its most pressing challenges. The department told us that
it engaged in a "virtually continuous programme of trying
to recruit qualified, or nearly qualified, actuaries. Because
of the severe shortage of actuaries in the UK market, this is
inevitably a slow process and it is difficult to make much more
progress than replacing those who leave to work in the private
Mr Daykin said "we would love to be able to have more actuarieswe
could provide a better service to our clients; we could expand
into other areas if we were able to recruit more".
GAD supplied us with a memorandum showing the department's staff
turnover rates in recent years. Those rates are consistently higher
than those reported in the private sector, although the gap between
the public and private sectors is being closed.
The Minister argued that this indicated that "we do not have
a significant issue of any kind to address on this".
24. One constraint on recruitment is the salary levels
GAD can offer. Mr Daykin said "we do have a salary structure
... which is quite competitive by civil service standards"
but "given public sector constraints, it is inevitable that
salary levels are increasingly out of line with the private sector,
especially for senior staff".
Salary levels are linked to the fees which GAD earns,
so if the department was able to earn more money from overseas
work, as we have suggested, better salaries could be paid. The
nature of GAD's work can also help with staff recruitment and
retention. GAD's branch of the Institution of Professionals, Managers
and Specialists argued that "to continue to attract and develop
high quality entrants, the department needs to maintain a good
range of actuarial work".
We look to the Government to ensure that GAD's expertise is
fully exploited in future: this will help it continue to attract
high-quality actuarial staff.
2 Treasury Committee, First Report, 1998-99, Office
for National Statistics, HC43 and Second Report, 2000-01,
National Statistics, HC137 Back
Treasury Committee, Sixth Report, 1998-99, Inland Revenue,
Treasury Committee, Tenth Report, 1998-99, Valuation Office
Agency, HC420 Back
Treasury Committee, Second Report, 1999-2000, HM Customs and
Excise, HC53 and Sixth Report, 2000-01, HM Customs and
Excise: Collection of Excise Duties, HC237 Back
Treasury Committee, Sixth Report, 1999-2000, Government's Cash
and Debt Management, HC154 Back
Treasury Committee, Third Report, 2000-01, HM Treasury,
Treasury Committee, Eighth Report, 2000-01, Royal Mint,
Treasury Committee, First Report, 2000-01, Work of the Treasury
Committee and Treasury Sub-committee, HC41 Back
Ev, p1 paragraph 1.1 Back
Ev, pp1-2 paragraphs 1.3, 2.4 Back
Ev, p3 paragraph 4.10 Back
Government Actuary's Department, Annual Report, 1999-2000, (hereafter
Annual Report) section 4 Back
Annual Report p3 and section 1 Back
Annual Report, p3 and section 3 Back
See paragraph 10 Back
Annual Report, p3 and section 2 Back
Annual Report, section 2 Back
Ev, p6 annex 1 Back
Ev, p1 paragraph 1.2; and see Qq99, 101 on absence of hidden subsidies Back
Annual Report, p11 Back
App 1 Back
App 7 Back
App 5 Back
Ev, pp11-12 Back
Ev, p12 paragraph 16 Back
App 6, paragraph 4 Back
Ev, p11 paragraph 2 Back
App 2, paragraph 14 Back
App 2, paragraphs 9, 14-16; also Ev, p3 paragraph 5.2 Back
App 2, paragraph 13 Back
App 4 Back
App 7, paragraph 5 Back
App 3 Back
App 6, paragraph 4 Back
Ev, pp1-2 paragraph 1.4 and Occupational Pension Schemes 1995,
GAD, 2000 Back
For example Apps 3, 4 Back
App 6, paragraph 12 Back
App 7 Back
App 7, appendix Back
Ev, p3 section 4 Back
Qq66, 69 Back
Qq31, 119 and see App 8 Back
App 4 Back
Paragraph 14 Back
Social Security Committee, Fifth Report, 2000-01, The Contributory
Principle, HC56-III, App 28 and How to Pay for the Future:
Building a Stakeholders' Welfare, F. Field, Institute of Community
Studies, 1996 Back
Qq37, 85 Back
Ev, p4 paragraphs 6.1-6.2 Back
Ev, p6 annex 1 Back
Ev, p4 paragraph 6.3 Back
Annual Report, pp6-8 Back
Qq8, 12 Back
Q6, 132-3 Back
See Q11 on marketing Back
Paragraph 24 Back
See Q129 for an example Back
Ev, p4 paragraph 7.4 Back
Ev, pp22-3 Back
Q90 and Ev, p4 paragraph 7.2 Back
App 3 Back