Cartoons – Page 4 – We Know Zero

Thinking in groups

26. February 2016 · Write a comment · Categories: Actuarial, Cartoons, Economics, Risk

Two women were fighting on my train the other morning. It was a packed train, with people standing the length of the carriage, so I didn’t see it so much as hear it. The first woman felt she had been pushed by the other one and complained very loudly and with much swearing. The second woman made some comment about the first woman’s mother and it escalated from there, getting louder and louder. Neither was prepared to let the other have the last word and, seeing the impact the mother comment had had, the second woman used it again. At which point the first woman hit her. The other passengers had been sitting and standing grim-faced up until this point, but now one or two intervened. One, who had the bearing of a lay preacher, attempted to assume sufficient authority to stop the argument. He was ignored. Another one stood and put the second woman in his seat and stood between them.

The second woman continued to make comments, but as much to herself as to the first woman. She kept stamping her feet in frustration. She was clearly in unbearable discomfort, but not from any physical pain. Finally she called the police and, as we pulled into New Street Station, started to give a physical description of her assailant. “Everyone on the train saw it” she said several times, while the passengers around her stared in any direction but hers.

I don’t know what happened next in the lives of these two women, although an announcement was made a couple of days later on the same service that police were working their way through the train for witness statements about the incident. They never appeared in my carriage, and I am not sure what I would have said if they had. And I don’t know what your reaction to my story is – whether that the other passengers, including me, should have acted differently or some commentary on the behaviour of the two women. I am, however, reasonably confident that you will have a reaction, perhaps quite a strong one, despite my limitations as a narrator. The reason I am confident about this is that I found myself, involuntarily, completely absorbed in the dispute, upset when one of the women expressed upset, constructing back stories for each of them, questioning their strategic wisdom at various points and, by the time we arrived at New Street Station and I dispersed with all the other witnesses, emotionally drained. And a look at the faces around the carriage suggested to me that most of my fellow passengers reacted similarly.

Why am I telling you this? Because it is a clear example of our domesticated brains in action. The almost physical pain this argument caused me and most of my fellow passengers is the reason we can travel from Sutton Coldfield to Birmingham every day with rarely an incident. It is often referred to these days, in pejorative terms, as Group Think. The shared assumptions and behaviours which allow us to live alongside each other in peace. I then get on a second train each day from Birmingham to Leicester, which I tell everyone is a great train to work on. But this is only because I can trust the 80 or so other passengers not to start an argument. The police could not cope if everyone behaved like the two women in my story. When the police do make an appeal for witnesses, they do so secure in the knowledge that nothing they say or do will encourage more than a handful to come forward, so strong is our group instinct to stay out of each other’s lives if we can. It is not indifference but survival. You need very strong structures to counteract the very strong instinct for Group Think.

However the reason Group Think is used pejoratively is that we have had vivid demonstrations of its power to make large groups of people behave stupidly. For example, herding behaviour in financial markets often causing the very problems people are trying to protect themselves from by going with the crowd. Or regulatory regimes which seem to encourage monocultures to develop, whether in finance, health, education, politics or academia, based on shared assumptions rather than encouraging diversity, because monocultures are easier to regulate. Many professions, including the actuarial profession, have introduced specific professional guidance to encourage whistle-blowing where appropriate, ie standing up to the policies and practices of their own organisations in most cases, which often means doing battle with Group Think. How successful such initiatives prove to be remains to be seen.

Encouraging challenges to Group Think is hard. It normally means going out of your way to allow views to be expressed you don’t agree with. It makes getting your own way harder to achieve. It can seem to us like the opposite of strong leadership and decisiveness when we seek out opinions that will make decision-making more complex. But we have made our society so complex and organisationaly fragile that this is what we are going to need to do more of in the future to stop it all from crashing down around us.

Kurt Vonnegut – The Shapes of Stories

15. February 2016 · Write a comment · Categories: Cartoons, Demographics, Risk

I wanted to share this lovely account of Vonnegut’s story shapes because it is one very powerful way to categorise different outcomes and, as such, potentially a very interesting way of illustrating them and their implications. I feel sure I will be returning to this theme soon.

Kurt Vonnegut - The Shapes of Stories

by mayaeilam.

From Visually.

Too much choice is no choice at all

10. April 2015 · Write a comment · Categories: Actuarial, Cartoons, Defined Ambition, Pensions, Regulation

Defined ambition has failed.

This was mainly because, tasked with suggesting a less onerous alternative to defined benefit (DB) schemes that gave more protection than defined contribution (DC) schemes, the pensions industry (including actuaries) did not get behind the least bad option, but instead presented a spectrum of options
The public and employers were unimpressed
And employers had enough on their plate anyway dealing with auto-enrolment
So they have now all (or nearly all) enrolled their employees into DC
And the reason they are in DC now is the same reason they were in DB before: because they were offered so many choices they lost sight of the fact that there was a choice.

The time to significantly influence corporate pension provision would appear to have passed until people realise how hard it is to make sufficient provision via a DC scheme. That may not be until the money actually runs out as the finance industry has a proven track record in keeping people in schemes (eg the early personal pensions and later endowment mortgages) long after they retain the capacity to do them any good.

In the meantime, people with DC pensions and madly transferring DB members now have freedom and choice. I predict that this too will fail.

This will mainly be because, tasked with providing cost-effective advice to people to empower them to make good decisions about their financial future, the pensions industry do not get their act together and just present a spectrum of options
The public will be unimpressed
And employers, who might have been persuaded to increase employee education and engagement in pensions, will have enough on their plate anyway dealing with auto-enrolment
So now most of them will be managing their own retirement with not enough money, vulnerable to pensions scammers and paying far more tax than they need to
And the reason they will not be in an annuity now is the same reason they were in one before: because they were offered so many choices (see the Pension Wise website, inexplicably still in an unfinished Beta state) they lost sight of the fact there was a choice.

The time to significantly influence individual pension provision appears to be rapidly running out.

How does this story end, I wonder?

Never trust an actuary?

06. August 2014 · Write a comment · Categories: Actuarial, Cartoons, Pensions, Regulation, Risk

Trust me. I’M AN ACTUARY!

I commented on the Pensions Regulator’s new code of funding in a recent post. The reason I am returning to it so soon is that a good friend of mine has pointed out a rather important, but subtle, aspect of the new code which I had missed. It goes to the heart of what we should expect from a professional in any field.

Experts and the Problem of P2C2Es

In 1990, while still in hiding from would-be assassins keen to implement Ayatollah Khomeini’s fatwa, Salman Rushdie wrote a book for his son called Haroun and the Sea of Stories. This introduced the idea of P2C2Es or Processes Too Complicated To Explain. These were how awkward things, like the fact that the Earth had a second moon which held the source of all the world’s stories, were kept hidden from ordinary people. All the people who worked on P2C2Es were employed at P2C2E House in Gup City under a Grand Comptroller. When I read it to my son a few years later I enjoyed the story of very clever people conspiring against the general public as a fairy tale.

Since 2008, it has become increasingly clear that this is no fairy tale. Whether you are looking for the cheapest quote for insuring your life, house or your car; a medical opinion about your health; an investment that meets your needs: it is a P2C2E.

Malcolm Gladwell and others make the case that expert failure is what we should really fear, when important things rely on experts not making mistakes doing things that most people do not understand. The inability to challenge expert opinion has cost us all a lot of money in the last few years. We should stay clear of P2C2Es whenever we can in my view. Professionals should present evidence and the intuitions gained from their experience, but leave the decisions to people with skin in the game.

Other professionals disagree with this. There is, from time to time, a push to get rid of juries in cases where the evidence is thought too complicated (eg fraud) or too dangerous to make public in even a limited way (eg terrorism). Some of these succeed, others don’t. There are also frequent political arguments about what we should have a referendum on, from Scottish independence (got one if you’re Scottish) to membership of the EU (one is promised) to recalling your MP mid-term (so far no luck on this one).

There is a similar divergence of opinion amongst actuaries. Since the Pensions Regulator’s first code of practice for funding was launched, in 2006, the scheme actuary’s role has been clearly set out as one of adviser to the scheme trustees and not, other than in the rare cases it was cemented in the scheme rules, a decision maker. However there are actuaries who look back wistfully to the days when they effectively set the funding target for pension schemes and all parties deferred to their expertise. I am not one of them.

Because this was really no good at all if you were a trustee expected to take responsibility for a process you were never really let in on. The arrival at a contribution rate or a funding deficit for a scheme funding on a basis presented to them as a fait accompli was to many trustees a P2C2E. We risk returning to those days with the new code of funding.

What this has to do with pensions

Compare the wording of the new Code of Practice for pension scheme funding with the previous one:

2006 code

The actuary is not passing an opinion on the trustees’ choice of method and assumptions.

2014 code

Trustees should have good reasons if they decide not to follow the actuary’s advice. They should recognise that if they instruct their actuary to certify the technical provisions and/or schedule of contributions using an approach which the actuary considers would be a failure to comply with Part 3, the actuary would have to report that certification to the regulator as the regulator considers such certification to be materially significant.

Where Part 3 refers to the funding regulations for actuarial valuations. Previously actuaries who were unable to provide the required certification of the calculation of the technical provisions or of the adequacy of the schedule of contributions had to report the matter to the regulator only if a proper process had not been followed or the recovery plan didn’t add up to the deficit. It was thought that going any further would involve passing an opinion on the trustees’ choice of method and assumptions.

Will the new code make schemes better funded? In some cases perhaps, but at the cost of moving scheme trustees into a more passive role where they do not feel the same level of responsibility for the final outcome. It is the difference between roads where cars are driven by people concerned with road safety and the ones we have where drivers are primarily concerned with not setting off speed cameras. The general level of safety is reduced in both cases, with the further danger that this passivity will trickle into other areas of trustee responsibility. And the risk to the schemes of the group think of scheme actuaries (a relatively small group of professionals who tend to all cluster around the same schedule of continuing professional development (CPD) events) is massively increased.

Ha-Joon Chang famously said never trust an economist. Is it any less dangerous to trust an actuary under these circumstances?

As easy as ABC?

01. June 2014 · Write a comment · Categories: Cartoons, Legal, Pensions, Regulation

With the recent revelations about the tax affairs of Gabby Logan and Gary Barlow in the news, it seems a good time to focus on the pension scheme equivalent.

Asset-backed contributions or ABCs have been lurking in the background of pension scheme funding for a while (Marks and Spencer set up such an arrangement in 2007), but have really only come to prominence since 2010. As you can see, they had quite a few takers over the next three years:

The total number of ABCs has now grown to more than 60, with a value of more than £6 billion. The value of each has tended to be around 10-20% of total scheme assets.

So why is this? For employers the answer is easy:

The employer can “pay” across an asset to the scheme while continuing to use it within its business.
The future stream of payments to the scheme is capitalised to make an immediate increase to the scheme’s funding level, which both makes the company accounts look better (although the Financial Reporting Council have been looking hard at a number of these) and reduces its Pension Protection Fund levy.
There is the potential to accelerate the tax relief on employer contributions if it is set up carefully.
The new effective “recovery period” (ie the period over which the stream of payments is paid from the special purpose vehicle known as a Scottish limited partnership (SLP) into the scheme) is usually longer than that of the recovery plan it replaces. It may also be more “back end loaded”, ie with a lump sum at the end allowing lower payments in the short to medium term.

But for trustees it is less clear:

The payments into the scheme are normally lower than they would be under a recovery plan which would not attract additional scrutiny from the Pensions Regulator.
The “asset” the employer is offering should already have been priced into the funding negotiations as part of the assets of the company included within the trustees’ covenant review. The ability to gain access to this asset on the occurrence of certain trigger events is, in principle, no different from the employer allowing the scheme to take a charge over that asset. However there are likely to be more hurdles to realising the asset under an SLP-type arrangement, as these arrangements are inherently more complicated than a simple legal charge.
There is usually no flexibility about the payments from such an arrangement which are targeted to meet a notional funding target many years in the future. By this time, the true funding target is likely to have changed, as will the value of the asset held in the SLP.
In order to make the arrangement work, they have to be a corporate trustee, even if they have not previously felt the need to incorporate to carry out their duties.

In summary, this is a vehicle for getting around the restriction on employer-related investment (ERI) of 5% of total assets which has existed since the Pensions Act 1995 came in. The only exceptions previously were small self-administered schemes (SSASs) which could use company property and loans to the company as assets on the basis that all the people in them were directors of the company. Whether it achieves this or not is as yet untested in the courts, although there have been some very confident legal opinions expressed about the fact that the letter of the ERI legislation only refers to shares or other securities, which cannot exist in this case because:

The SLP is an unincorporated body within the UK so it cannot issue shares. As one lawyer has said “the magic of a SLP is its distinct legal identity”.
A partnership interest is not generally considered a share (which is why, the confident legal opinion goes, along with the safeguards written into the agreements, Scottish independence would not make these deals suddenly illegal – although this obviously begs the question of why then you would go to such great lengths to create a SLP in the first place).

The Pensions Regulator is clearly uncomfortable with these arrangements, sensing that they are just devices for driving a coach and horses through its code of practice on funding. However, they are not illegal, so the Regulator has been able to do no more than issue guidance to trustees and their advisers on asset-backed contributions, with a long list of risks that they pose and advice trustees would need to seek before agreeing to one. They correctly point out that an ABC is not a bond-like investment, as some have suggested (unless by bond you mean a corporate bond issued by the sponsor of the scheme, ie an investment which becomes riskier the worse your sponsor is doing – which is not normally the point of bond investment). But the real kicker is the requirement they have set for a separate underpin that would protect the scheme’s position eg “in the event that the courts find that ABCs are void for illegality or where there is a change in the law”. This could turn out to be very expensive for the 60 such arrangements already in place.

However, just for a moment, despite all memories of other situations where lawyers have told us that scheme documents are copper-bottomed but which have subsequently proved to have traces of straw (equalisation, for instance), let us assume that the ABC drawn up in the way the Regulator has suggested will benefit the schemes which participate. These arrangements may observe the letter of the legislation but they clearly do not observe their spirit. Just look at the typical structure of one:

And then tell me that it bears no resemblance to the kind of “tax management scheme” we have seen punished recently. Here is Chris Moyles’ one as an example:

More and more voices are questioning the tax relief that pensions receive (the Institute of Fiscal Studies being one recent example). Steve Webb has also indicated that he would like to see a reduction in tax relief on pension contributions for higher rate taxpayers. Is this really the time to be championing schemes which accelerate that tax relief even more?

The misbehaviour of mistakes

25. April 2014 · Write a comment · Categories: Cartoons, Risk

The Comedy of Errors
– with apologies to William Shakespeare in the week of his 450th birthday

There are two ways that mistakes can happen when you are carrying out an experiment to test a hypothesis. Experiments usually have two possible outcomes: accepting a “null” hypothesis, which means concluding that the experiment does not challenge its truth, and rejecting a null hypothesis, which means concluding that the experiment does provide sufficient evidence to do so.

Type 1 errors, otherwise known as “false positives” are when you think there is evidence for rejecting the null hypothesis (eg deciding there actually is something wrong with a smear test) when there isn’t. Type 2 errors, otherwise known as “false negatives”, are when you accept the null hypothesis but you really shouldn’t (eg telling someone they are all clear when they are not).

Saddam Hussain once famously said “I would rather kill my friends in error, than allow my enemies to live”. This suggests that he was really very much more concerned about Type 2 errors than Type 1 errors.

He is not alone in this.

A recent widely reported academic paper published in Nature claimed to have a test that “predicted phenoconversion to either amnestic mild cognitive impairment or Alzheimer’s disease within a 2–3 year timeframe with over 90% accuracy”.

The latest statistics from the Alzheimer’s Society suggest that around 1 in 14 or 7% of over 65s will develop Alzheimer’s. Probably not all of these people will contract the disease within 3 years, but let’s assume for the sake of argument that they will. Even so this means that, out of 1,000 people over 65, 930 people will not get Alzheimer’s within 3 years.

Applying the 90% accuracy rate allows us to detect 63 out of 70 people who actually will get Alzheimer’s. There will be 7 cases not picked up where people go on to develop Alzheimer’s. However the bigger problem, the Type 1 error that Saddam Hussain was not so bothered about, is that 10% of the people who do not and will not get Alzheimer’s will be told that they will. That is 93 people scared unnecessarily.

So 63 + 93 = 156 people will test positive, of which only 63 (ie 40%) will develop Alzheimer’s within three years. The “over 90%” accuracy rate becomes only a 40% accuracy rate amongst all the people testing positive.

In statistical tests more generally, if the likelihood of a false positive is less than 5%, the evidence that the hypothesis is true is commonly described as “statistically significant”. In 2005 John Ioannidis, an epidemiologist from Stanford University, published a paper arguing that most published research findings are probably false. This was because of three things often not highlighted in the reporting of research: the statistical power of the study (ie the probability of not making a type 2 error or false negative), how unlikely the hypothesis is being tested and the bias in favour of testing new hypotheses over replicating previous results.

As an example, if we test 1,000 hypotheses of which 100 are actually true but with a 5% test of significance, a study with power of 0.8 will find 80 of them, missing 20 because of false negatives. Of the 900 hypotheses that are wrong, up to 5% – ie, 45 of them – could be accepted as right because of the permissible level of type 1 errors or false positives. So you have 80 + 45 = 125 positive results, of which 36% are incorrect. If the statistical power is closer to the level which some research findings have suggested of around 0.4, you would have 40 + 45 = 85 positive results, of which 53% would be incorrect, supporting Professor Ioannidis’ claim even before you get onto the other problems he mentions.

We would have got much more reliable results if we had just focused on the negative in these examples. With a power of 0.8, we would get 20 false negatives and 855 true negatives, ie 2% of the negative results are incorrect. With a power of 0.4, we would get 60 false negatives and 855 true negatives, ie still less than 7% of the negative results are incorrect. Unfortunately negative results account for just 10-30% of published scientific literature, depending on the discipline. This bias may be growing. A study of 4,600 papers from across the sciences conducted by Daniele Fanelli of the University of Edinburgh found that the proportion of positive results increased by over 22% between 1990 and 2007.

So, if you are looking to the scientific literature to support an argument you want to advance, be careful. It may not be as positive as it seems.

Freedom for DBdom?

31. March 2014 · Write a comment · Categories: Actuarial, Cartoons, Defined Ambition, Economics, Pensions, Regulation

My father used to regularly paraphrase Benjamin Franklin at me about nothing being certain except death and taxes when I was growing up. However, having spent the turn of the century advising members of small self-administered schemes how to navigate the 6 (some claimed there were in fact up to 13) different tax regimes for pensions which then applied so as to get the maximum possible benefit from them, I was a cheerleader of the tax simplification which the 2004 Finance Act brought in and which demolished all that.

Now it seems that actuaries are no longer going to be necessarily required for members of defined contribution (DC) schemes to get at their savings. In an age of increasing uncertainty about both death and taxes, I find myself cheering this too.

But why stop there? In their consultation document, the Government states that:

With the right consumer guidance, advice and support, people should be able to make their own choices about how to finance their retirement. Everybody’s circumstances are unique and it should not be for the State to dictate how someone should have to spend their savings.

It then adds:

Those who want the security of an annuity will still be able to purchase one. Equally, those who want greater control over their finances in the short term will be able to extract all their pension savings in a lump sum. And those who do not want to purchase an annuity or withdraw their money in one go, but would prefer to keep it invested and access it over time, will be able to purchase a drawdown product.

So the question has to be asked: why are these freedoms and choices not to be extended to defined benefit (DB) members as well?

The reasons the Government have advanced for the change are equally compelling when applied to DB:

There is a lack of choice for people at retirement, which has become more of an urgent concern now that auto enrolment is boosting DC membership. This is even more the case for DB members who are already numerous (although getting less so daily), as their only choices are how much cash to take up to the 25% tax free limit and (up to a point) when to retire. The other freedom DB members have, of course, is to transfer out, although this freedom makes everybody feel very nervous and is possibly about (see below) to be snuffed out altogether.
Current regulations deter innovation. This is, of course, why defined ambition as an idea has been so slow to get off the ground.
Restrictions on cash commutation imply a lack of trust of members to be able to decide how they spend their savings.
The concern that the annuity market has not maximised income for scheme members. This is mirrored by the high cost of de-risking via bulk annuities, which is the ultimate “flight path” for most DB pension schemes, and which many argue has resulted in a big drag on the growth of UK PLC.

All that would be required to extend these freedoms would be to allow DB members to commute as much of their benefits at retirement, whether for cash or income drawdown, as they wanted, with the rest taken as pension as now.

To be fair to the Government, they do acknowledge the logic of extending the freedoms set out in the consultation to DB members in section 6. But then something strange happens.

Firstly, for public sector schemes, as they are mostly unfunded, the Government says it is concerned about the negative cashflows of members transferring out. If 1% of public service workers did so, the joint Treasury/HMRC analysis is that the net cost would be £200 million. This, I think, provides a revealing peak into the world of state funding, where taking on the Royal Mail Pension Plan was seen as positive for Government finances and off balance sheet private finance initiative (PFI) contracts continue to be negotiated offering doubtful value to the state. It doesn’t matter how much things cost over all, it seems, as long as you are only paying out a bit at a time. The Government often behaves in this respect like the victim of a pay day loan shark. Depending on the commutation terms offered, extended commutation has the potential to solve the public sector pension crisis in a way that Hutton’s Pensions Commission didn’t quite manage to.

Not even considering the option of allowing greater commutation from the schemes themselves, the Government has already decided to ban such transfers from public sector to DC. There is to be no consultation on this.

For private DB schemes, the Government says the decision is “finely balanced”. They are worried about all of those currently captive DB pension investments being spent on Lamborghinis. This rather contradicts the earlier declaration of trust in pensioners to make appropriate decisions about their retirement – after all appropriate investment in support of regular income in retirement (which would presumably be recommended by the “guaranteed guidance” to be offered to DC members) should not differ markedly from the equivalent investments in DB schemes. Whether DB schemes invest on a longer-term basis than individuals is, as the Kay Review made clear, uncertain.

However the Government is very concerned about financial markets – they have section 6 of the consultation devoted to nothing else. It is almost as if individuals can be trusted to look after themselves, with a slightly bigger safety net and a bit of advice, but financial markets cannot.

Again, the Government is not consulting on extending commutation of benefits, but solely on the transfer issue. And apparently removing the current right of all members of defined benefit schemes, except in exceptional circumstances, as proposed with public service defined benefit schemes…must be the government’s starting point, unless the issues and risks around other options can be shown to be manageable.

Even if the Government does manage to stop people pouring out of the exits before April next year, this has to be bad policy. To provide more freedom and choice to one group of pensioners and at the same time to remove a longstanding freedom (and one available at the point members joined the schemes) from the other groups is clearly unfair. What is worse, with an election looming, it is likely to be unpopular.

By the way, one of the things that stands out for me in this whole consultation is the use of State with a big S and government with a small g. It is as if typography alone could portray the “State” as big and bad and “government” as on the side of the little guy. I have done the reverse here.

So, if you DB members want to stop the flickering light of Freedom and Choice dying before it even got going, I advise you not to go gentle but to rage, rage and respond in large numbers to questions 9 and 10 of the consultation in particular. You have until 11 June.

When it comes to annuities, most of us are enhanced. We just don’t know it yet

27. February 2014 · Write a comment · Categories: Cartoons, Demographics, Pensions, Risk

In all the talk about annuities and the poor value they currently offer, nearly all of it has been based on standard annuity rates, ie where there is nothing sufficiently medically wrong with you to affect your life expectancy. However this is almost certainly not the rate you should be looking at.

Go to any of the annuity provider or broker websites, sometimes buried away a little, and you will find a link explaining what they can offer in the way of “enhanced” or “impaired lives” annuities. Legal & General’s web page on this looks like the kind of warning notice you find on the wall of your doctor’s surgery waiting room, with headings like Smoking, Type 2 Diabetes and High Blood Pressure. But in the upside-down world of buying annuities these become good things to do or have.

Just Retirement give some handy illustrations of what various conditions could mean for your income: up 20% for minor conditions like obesity and hypertension, up 30% for “moderate” ones like being a heart attack survivor with a bypass and 40% for serious medical conditions like stage 2 bowel cancer one year in. However, you don’t need to get anywhere near the frankly frightening conditions in the moderate and serious boxes to make a big difference to the income you can receive. annuitydiscount.co.uk provide a very long list of medications (covering every letter in the alphabet except J and Y) which could lead to an impaired life annuity if disclosed to the annuity provider.

As the BBC article from 2012 posted by the Better Retirement Group on enhanced annuities says: “At its simplest an annuity is a bet with the insurance company about how long you will live.”

So on that basis, it makes sense to stack the odds in your favour as much as you can. Which makes the 2007 article in the New England Journal of Medicine entitled, rather dully, Incidental Findings on Brain MRI in the General Population, such an interesting read.

They studied 2,000 people (mean age 63.3 years, range 45.7 to 96.7) from the population-based Rotterdam Study in whom high-resolution, structural brain MRI scans had been carried out. Asymptomatic brain infarcts (more commonly known as strokes) were present in 145 people (7.2%). Among other findings, aneurysms (1.8%) were the most frequent. Benign brain tumors also turned up reasonably often (1.6%). The most extreme case was someone with a large, chronic subdural haematoma, who was subsequently found to have had a minor head trauma 4 weeks before the MRI scan. Some of the scans are shown below.

brain scans But the really amazing thing is this: only 2 of the 2,000 people scanned (the subdural haemotoma mentioned above and another who had a 12 mm aneurysm of the medial cerebral artery) had any idea that there was anything wrong with them!

Another huge area of undiagnosed disease (and on the annuity.co.uk list for enhanced annuities) is prostate cancer. According to a systematic review of prostate cancer biopsy schemes by the University of York in 2005, where they quoted from the NHS Centre for Reviews and Dissemination publication on screening for prostate cancer, Effectiveness Matters:

Post mortem studies show that 30% of men over 50, who had no symptoms of prostate cancer whilst alive, had histological evidence of prostate cancer at the time of death. This percentage rises to 60-70% in men over 80 years of age. In other words, most men with prostate cancer die with, rather than from, the disease.

The main reason these studies have been carried out is to determine whether screening for prostate cancer, which kills 3.8% of men with the disease, has saved many lives. The Prostate Specific Antigen (PSA) test that is commonly used to detect prostate cancer in the absence of symptoms is not only prone to false positives and negatives (ie telling you you have it when you don’t and don’t have it when you do – something all screening suffers from to some extent), but can lead to you being offered treatment which may well be worse than the disease. This is discussed further in the excellent The Norm Chronicles, by Michael Blastland and David Spiegelhalter, which questions whether, overall, screening is particularly effective in saving lives.

Effective in preventing death? Perhaps not. But effective in increasing retirement income? Almost certainly.

The latest Association of British Insurers (ABI) facts and figures on the UK annuity market suggest that enhanced annuities have grown in popularity, to 24% in 2012 from 2% in 2003. There is scope to make further large increases in these figures if more people can be persuaded to have themselves screened for some of the most common undiagnosed conditions before they retire.

So don’t necessarily accept a standard annuity rate. And consider getting yourself tested first.

Peering over the barricades

30. January 2014 · Write a comment · Categories: Actuarial, Cartoons, Legal, Pensions, Regulation

Have you, as a result of your frenetic activity since Christmas, got a bit of a peer review backlog? I can help. Let me be the scheme actuary you’re temporarily short of. With a 10% discount on the rates shown here until the end of the UK 2013/14 tax year, and a further 10% reduction for type 2 peer reviews.

Pugwash Economics

27. December 2013 · Write a comment · Categories: Cartoons, Economics, Regulation

Imagine a ship tossed around in a rough sea. The waves throw the vessel in all directions, before the sea level plummets sharply. Whirlpools have formed to the south of them and there are fears these will spread north and swallow the ship. The only means of escape is a rope ladder dangled above the ship, from an airship desperately being inflated above their heads. However the only place on the ship where this can be reached is the ship’s bridge, which is reserved for the ship’s officers.

Strangely the crew do not attempt to storm the bridge but seem resigned to their fate. Instead the captain orders the airship to dump several tons of ballast into the ship, pulling it even further down into the water. To all pleas for mercy from the crew his reply is the same: row harder. The captain has had the sail removed and passed up to the airship crew, on the understanding that the material will be made into a tow rope that will pull the ship to safety. But that seems like a long time ago. The crew have been left with no choice but to row, their daily rations gradually dwindling.

Question: if the sea level rises again, as of course it will eventually, so that the rope ladder moves into reach for everyone on the ship not too weak to take advantage of it, despite everything the ship’s officers have done to make the crew’s lives more hopeless, should we congratulate the ship’s captain on his stewardship? I and many others think not.

Meanwhile the head of a pin is drawing perilously close to the fabric of the airship as the crew pile heedlessly up the rope ladder…..

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