Fair and balance rate for benefits not scheduled in defined contribution plans

ABSTRACT The objective of this study is to propose a methodology that, using multiple decreases, in addition to classified by actuarial profile and source of social security costs, calculates actuarially fair and balanced rates for unscheduled collective costing benefits from Defined Contribution (DC) pension plans. There are no studies in Brazil about costing rates for benefits not scheduled in pension plans of the DC modality. Any institution that pays collective cost social security benefits must determine an actuarial rate that is not insufficient, generating a financial imbalance in the fund, nor excessive, compromising the participant’s income. This work is the first study on costing rates for collective costing benefits from pension plans with DC modalities. Actuarially fair rates are obtained considering multiple decreases and equalizing the present value of contributions and the present value of pension and disability benefits, classified by actuarial profile and source of social security cost. The specific balance rate is determined for each source of social security costs and is obtained considering the actuarially fair rates for each actuarial profile. The general balance rate is obtained by the marginal contribution of each specific balance rate. The proposed methodology was used to calculate the rates of unscheduled benefits with collective costing in DC modality plans. The proposed methodology estimated that the legal changes, resulting from Constitutional Amendment 103/2019, indirectly increased by more than 4% the general balance rate of the unscheduled benefits of the Supplementary Social Security Foundation of the Federal Public Servant of the Executive Branch of the Federal Government (FUNPRESP-Exe).

AWARENESS ON PENSION PLANS-A STUDY OF INVESTORS’ IN BENGALURU CITY

Individuals make inconsistent, irrational financial decisions mainly due to disproportionate time preferences. Bias and procrastination prevail. Along with a default option, there is a need for a customized plan with individuals' socio-cultural and economic status. Low participation rates are mainly due to a lack of awareness of pension literacy and behavioral aspects. Individuals have failed to create a corpus to protect themselves for retirement as there is a lack of awareness to suitability of a plan to one’s situation, failure to measure income adequacy at retirement, not able to identify the link between contributions made and pension drawdown, etc. Age and gender differences prevail strongly. Defined contribution plans are likely to dominate in global pension model in the years to come. Individuals are ready to own their risk but have little control and knowledge to cover themselves. Frequent timely and prompt advice or counseling from investment advisors will enable participants to understand the need, identify suitable options and schemes, and provide themselves with sustainable long-term savings. This should convert willingness to participate to real participation. Keywords: Financial literacy, Pension knowledge, Defined contribution pension plans (DCP), irrational decision making, demographics.

Financial Advice, Plan Choice, and Retirement Plan Satisfaction

Most private sector employees have access to defined contribution retirement plans while public sector employees often may choose defined benefit or defined contribution plans. This research utilized a survey of faculty to analyze retirement plan satisfaction. Advice from a financial planner was positively associated with satisfaction with portability. Retirement plan knowledge was negatively associated with satisfaction on the decision period. Selection of a defined benefit plan was positively related to four aspects of satisfaction and negatively related to regret. Financial planners assisting individuals who face such choices should acknowledge the decision's challenges and evaluate the client's level of retirement planning knowledge. Focusing on long-term goals and the client's investment and mobility risk tolerance may be helpful, especially after market corrections.

Implicaciones del consumo y de la flexibilidad de la oferta laboral en el bienestar de los partícipes de planes de pensiones del Sistema de Empleo

This work aims to carry out a comparative analysis of the pension plans of the employment system (both defined benefit and defined contribution plans) from the point of view of the welfare perceived by each worker. Considering flexibility in the labor supply of the promoting company of the pension scheme, we seek to maximize the utility of the time preferences of consumption and leisure for each employee. We propose a dynamic optimization problem of intertemporal choice, and we describe both the returns on the investments of the Fund and the annual wage growth rates as discrete markovian processes. For each type of pension plan, we analyse the optimal consumption and leisure values that maximize the utility (welfare) of the worker over several periods of time.