The social security institution ensures that the scheme liabilities are taken into account in the investment process.
A key driver of investment decisions is the timing, level and nature of net cash flows of the social security scheme and how these will evolve in the future. Therefore, the actuary will have a significant role in estimating the future cash flows of the scheme and interpreting these for the investment process. These cash flows consist of future benefit payments, contributions received, expenses and income from assets and other sources. Appropriate modelling can be conducted to determine an investment strategy that is likely to meet the social security institution’s mission and goals. While there is a clear link to the calculations and projections carried out as part of the actuarial valuation process (see Part A of these Guidelines), the actuary is also likely to input into more specific investment analyses relating to future benefit and expense cash flows (for example, Asset Liability Management(ALM)) which will provide an important input into the development of investment strategy and the management of the process.
This guideline should be read in conjunction with Guideline 6 of the ISSA Guidelines on Investment of Social Security Funds.