Frequently asked questions

• PensionsFirst Analytics is led by four partners with an experienced team of over 70 people drawn from the actuarial, capital markets and technology industries. This combination of different spheres of expertise brings an entirely new perspective to the problem of measuring and managing defined benefit (DB) pension scheme risk, namely:

• a keen understanding of risk
• the need for up-to-the-minute and detailed data
• the ability to use best practice and auditable methods
• recognising the importance of ease of use
• We believe that long-term DB scheme liabilities need to be managed with the same precision and timeliness afforded to other balance sheet risks.
  

• PFaroe is a web-based platform, that brings a new level of sophistication to DB scheme risk management. It allows fast, in-depth and accurate analysis of the scheme, including: asset/liability valuation; detailed risk analytics reports; cashflow forecasts; and the ability to design and monitor sophisticated risk management solutions.

• 'fa-(?)ro as in ‘Pharoah’ (silent ‘P’)

• The key differences that PFaroe customers experience are:
  
  
  • Regular and timely reporting
    You can monitor and manage your scheme to your timescales. PFaroe provides regular full scheme valuations, as well as ad hoc valuations (not just a roll forward) within 24 hours, including liability and asset cashflow projections.
    
    
  • Common platform: assets and liabilities in one place
    For the first time, assets and liabilities can be viewed on a common platform, allowing you to see your total risk position. You can analyse the impact on your scheme of different financial and demographic assumptions, and run consistent stress analysis across your balance sheet.
    
    
  • Detail: granularity and accuracy
    Scheme liability calculations are based on individual member-level detail and asset valuations are based on individual ‘security by security’ data. This level of detail enables PFaroe to generate accurate cashflow profiles for assets and liabilities – giving you a clearer picture of the risk.
    
    
  • Transparency and best practice
    PFaroe brings new levels of transparency and best practice to scheme risk reporting. Valuations are presented with an auditable, detailed report on all assumptions made.
    
    
  • Accessible: easy to use and understand
    You don’t need to be an actuary to take advantage of PFaroe. Information is presented in a highly visual way – helping to illustrate the nature of the pension risks. PFaroe is an intuitive web-based system, making it easy for multiple stakeholders to view, use and analyse information.
    
    
  • Highly flexible
    PFaroe is based on a ground-up approach to modelling, which means it is easily tailored to scheme-specific requirements. This means any scheme, no matter how complex, can benefit from using PFaroe.

• Understand the risk, manage the risk
  PFaroe gives sponsors and trustees an accurate, detailed, up-to-date picture of pension risks – so you can understand what’s driving volatility and causing funding issues. This knowledge means you can make more informed decisions about how to manage risk.
  
  
• Get the information you need, when you need it
  PFaroe allows you to report pension risk with the regularity, precision and transparency typically available for other balance sheet exposures.
  
  
• Take advantage of market opportunities
  PFaroe’s timely, accurate delivery of information means you can react to market opportunities quickly. You can also evaluate more sophisticated investment strategies and monitor their ongoing effectiveness.
  
  
• Take control
  The ability to conduct instant scheme analysis at your desktop reduces the reliance on external advisors, giving you an informed view and greater control of risk.
  
  
• Demonstrate governance
  PFaroe brings consistency of method to reporting pension risk, ensuring that all stakeholders are better informed.
  
  
  • Change the dialogue by having a shared understanding. Having a common risk platform for sponsors and trustees focuses discussion on positive action, rather than debating methodologies.

• Left unmanaged, the risks can seriously impact the core business with significant implications for both shareholders and scheme members.
  
  
• If you can’t measure risk, you can’t manage it. PFaroe allows pension scheme sponsors and trustees to take control of their DB scheme risk.
  
  
• Many sponsors and trustees recognise the need to improve scheme management but prior to PFaroe they had been frustrated by a number of factors:
  
  
  • Multiple data sources
  • Out-of-date valuations
  • Heavy reliance on external advisors
  • Assets and liabilities analysed and reported separately
  • An inability to measure scheme risk on a timely basis
  • Lack of consensus between trustees, sponsors and their advisers about how to manage the risks

• PFaroe has been designed by a unique group of experienced professionals drawn from the capital markets, pensions, insurance and technology industries. This combination of skills has driven an entirely new and radically different approach that understands the need for detail, transparency and ‘best of breed’ risk analysis to be applied to the DB industry.
  
  
• A similar combination of professionals does not readily exist in the traditional DB service providers and consequently the mindset for such product development has presumably been lacking.
  
  
• The time is right. There is an increasing demand from regulators and shareholders for better risk reporting and governance of key risks – a standard of excellence which has not previously been applied to DB risk.

• Our mission is to revolutionise the way the DB pensions industry measures and manages risk. To do this, we have developed PFaroe: a web-based platform that brings a sophisticated risk management approach directly into the hands of pension sponsors and trustees.

• The pensions world has changed. Changes in regulatory and accounting rules have fundamentally altered the way that DB exposure impacts the corporate sponsor and made the role of trustees more onerous. As a result sponsors and trustees are now increasingly concerned about funding levels, volatility and governance.

The on-boarding period for a typical PensionsFirst Analytics customer would take 4-8 weeks but it depends on the complexity of the scheme.

• On the contrary, the current global recession has increased companies’ sensitivity to the risk and volatility exhibited by their DB schemes and has encouraged greater scrutiny from regulators and shareholders around risk reporting and governance of DB risks.
  
  
• The regular closing of DB schemes is only an indication of how concerned companies are to lock down their exposures. However, closing a scheme does not remove a company’s obligation to pay its previously accrued liabilities. The need to measure and manage risk still remains.

• PFaroe is tailored for each individual customer’s requirements so the price depends on which modules are needed and the size and complexity of the scheme(s). Please contact us for an estimate based on your requirements.
  
• There is an initial fee for on-boarding the customer which includes the uploading of all member data and programming of the scheme rules and benefits as well as a full actuarial valuation reconciled to the scheme’s last valuation.
  
  
• Once on-board, there is an annual subscription fee which is set according to the size of the scheme and the level of service required.

• We’re leading the way with ground-breaking technology for the pensions industry. PFaroe has been created from ‘a blank sheet of paper’ based on the most up-to-date technologies available. Once a client has been on-boarded, valuations can be run incredibly quickly and efficiently. Our systems are so cutting-edge that Dell, one of the leading global technology companies, has used PensionsFirst as a case study.
  
  
• In contrast, consultants tend to work with legacy actuarial systems that have been designed around delivering triennial valuation results as opposed to the ongoing regular monitoring available through PFaroe. If you build a system to deliver a valuation once every three years, you’re going to build it differently to one that gives a valuation every day.
  
  
• At the risk of repeating ourselves, what is also unique to us is our people - the bringing together of expertise from the actuarial, capital markets and technology industries. For example, in the capital markets it is taken for granted that you can value your position on a daily basis – we have brought that mindset to the pensions world.

• Aga Rangemaster, Daily Mail General Trust and HSBC. As we only launched PFaroe in November 2009, we’re very pleased with the initial level of client interest.

• Hugely positive. There is a genuine belief that PFaroe has changed forever the way they report on and manage their DB risk.
  
  
• Interestingly, the benefits and opportunities in using PFaroe become greater the more it’s used. The more information and detail that is available, the more analysis can be done and the more knowledge is acquired.
  
  
• PFaroe has been incorporated into regular presentations to boards and executive committees and forms the foundation for proper MIS reporting.
  
  
• These are some of the things PFaroe users say:
  
  
  •  "What PFaroe offers is huge. This is potentially an industry-changing move.” Trustee
  • “In a few years’ time we will ask ourselves how we ever managed without a tool like this.” CEO
  • “PFaroe borders on the brilliant.” Pensions Manager

• We expect PFaroe to have global application but our core initial focus will be the US and UK markets.
  
  
• However even some of our first customers, with the desire to report and measure on all their DB risk on one platform, have schemes outside of the US and UK and we will naturally be incorporating these jurisdictions as and when required.