Valuation of an early exercise defined benefit underpin hybrid pension

Zhu, Xiaobai; Hardy, Mary R.; Saunders, David

doi:10.1080/03461238.2018.1463556

Cited by 7 publications

(2 citation statements)

References 13 publications

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“…The hybrid plan is a solution to overcome the risks faced by the DB and DC plans, where the parameters of pension benefits and contributions have been explicitly determined [3]. The hybrid plan which combines the characteristics of both the DB and DC plans can better meet the needs of employers and employees [15]. This study will use a floor-offset pension-type hybrid model.…”

Section: Hybrid Pension Planmentioning

confidence: 99%

Comparison of the Actuarial Model for A Normal Lumpsum Pension Plan Using Defined-Benefit and Hybrid Models of Company Employees

Maharani,

Purnaba,

Ruhiyat

2023

InPrime:Ind.Jour.Pure.Applied.Math

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In this research, we delve into the realm of pension plan programs, essential for securing a robust livelihood post-retirement through the provision of pension benefits to retired employees. Addressing the intricate balance between financial sustainability and risk mitigation, companies are mandated to allocate funds for pension benefits. The hybrid pension plan, a novel amalgamation of defined-benefit (DB) and defined-contribution (DC) features, emerges as a strategic solution to minimize the inherent risks of both models. This study undertakes the task of calculating the costs associated with pension benefits and the replacement ratio (RR) for both the traditional DB plan and the innovative hybrid pension plan. Drawing on data from 90 employees at Company X, we assume an effective interest rate of 4% for the DB plan and explore various scenarios for the hybrid plan, ranging from 3% to 5%. The findings present a compelling narrative: the costs required to fund the hybrid plan are found to be notably lower than those for the DB plan, ushering in a more economically sustainable approach. Concurrently, the RR derived from the hybrid plan surpasses that of the DB plan, showcasing its potential to provide a more substantial post-retirement income. Additionally, as the effective interest rate escalates, costs rise, and RR declines, emphasizing the sensitivity of these parameters to the interest rate. Considering these results, a conclusion emerges: the hybrid pension plan stands out as the optimal choice for employees at Company X, presenting a novel and advantageous approach to pension program design and implementation.Keywords: Cost of pension benefits; Defined-benefit; Hybrid; Pension plan; Replacement ratio. AbstrakDalam penelitian ini, kami mendalami program pensiun, yang penting untuk menjamin penghidupan yang kuat setelah pensiun melalui pemberian manfaat pensiun kepada karyawan yang pensiun. Untuk mengatasi keseimbangan rumit antara keberlanjutan finansial dan mitigasi risiko, perusahaan diwajibkan mengalokasikan dana untuk manfaat pensiun. Program pensiun hybrid, yang merupakan penggabungan fitur manfaat pasti (DB) dan iuran pasti (DC), muncul sebagai solusi strategis untuk meminimalkan risiko yang melekat pada kedua model tersebut. Studi ini menghitung biaya yang terkait dengan manfaat pensiun dan replacement ratio (RR) untuk program DB dan program pensiun hybrid. Berdasarkan data dari 90 karyawan di Perusahaan X, kami mengasumsikan tingkat bunga efektif sebesar 4% untuk program DB dan menggunakan rentang 3% hingga 5% untuk program hybrid. Hasil penelitian menemukan bahwa biaya yang diperlukan untuk mendanai program hybrid ternyata jauh lebih rendah dibandingkan dengan program DB, sehingga menghasilkan pendekatan yang lebih berkelanjutan secara ekonomi. Pada saat yang sama, RR yang diperoleh dari program hybrid melampaui program DB, sehingga menunjukkan potensinya dalam memberikan pendapatan pasca-pensiun yang lebih besar. Selain itu, ketika tingkat bunga efektif meningkat, biaya meningkat, dan RR menurun. Hal ini menekankan sensitivitas parameter-parameter ini terhadap tingkat bunga efektif. Kesimpulannya program pensiun hybrid merupakan pilihan optimal bagi karyawan di Perusahaan X, karena menghadirkan pendekatan baru dan menguntungkan dalam perancangan dan implementasi program pensiun.Kata Kunci: Biaya manfaat pensiun; Dana pensiun; Defined-benefit; Hybrid; Replacement ratio. 2020MSC: 62P05.

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Section: Hybrid Pension Planmentioning

confidence: 99%

Comparison of the Actuarial Model for A Normal Lumpsum Pension Plan Using Defined-Benefit and Hybrid Models of Company Employees

Maharani,

Purnaba,

Ruhiyat

2023

InPrime:Ind.Jour.Pure.Applied.Math

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“…If the government wants to take the best policy by using the mortality rate of the Indonesian population in the future, then demographic data would be a better data used to find out information about the current condition of the Indonesian population. This is based on the possibility of a decrease in the probability of annual death in adulthood that may occur in the future (Zhu et al, 2018). Thus, it is necessary to observe mortality rate data for the entire population in Indonesia and carry out mortality projections to measure the longevity risk (Chang & Sherris, 2018).…”

Section: A Introductionmentioning

confidence: 99%

Mortality Projection on Indonesia's Abridged Life Table to Determine the EPV of Term Annuity

Siswono¹,

Azmi²,

Syaifudin³

2021

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The life insurance industries usually use the Life Table for the valuation process, especially in calculating premiums and policy values of a policy. However, the Life Table is rarely updated; and it may even take years before they are updated. This happens because the insurers believe that the information in the Life Table is still related to the current state of a country and for the next several years. In fact, data and information related to mortality rates in a country are constantly changing and always being updated annually. Therefore, as an approach, researchers use the projection of mortality to approach the mortality rate in the future. Thus, future mortality data can be predicted so that better policies can be made by the governments or insurance industries. In this study, the Abridged Life Table of Indonesia is used in the projection of mortality for both sexes (male and female) of the population in Indonesia. The results of mortality projection are then used to calculate the Expected Present Value (EPV) of a term annuity-due under uniform distribution of deaths (UDD) for several values of and ages. The results obtained show that there is a decrease in the value of the mortality rate in the next few years. Therefore, it can be assumed that there is a possibility for longevity risk to occur in the future.

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Valuation of a DB underpin hybrid pension under a regime-switching Lévy model

Zhang²,

Zhong³

2023

Journal of Computational and Applied Mathematics

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Valuation of an early exercise defined benefit underpin hybrid pension

Cited by 7 publications

References 13 publications

Comparison of the Actuarial Model for A Normal Lumpsum Pension Plan Using Defined-Benefit and Hybrid Models of Company Employees

Comparison of the Actuarial Model for A Normal Lumpsum Pension Plan Using Defined-Benefit and Hybrid Models of Company Employees

Mortality Projection on Indonesia's Abridged Life Table to Determine the EPV of Term Annuity

Valuation of a DB underpin hybrid pension under a regime-switching Lévy model

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