I also have trouble understanding the survival method for projecting pension.
It would be helpful if an explantion in words of both the factor and survival method is given or a rigourous mathematical defination.
My best guess at a reasonable working of the method is something like this:
let N(x,t) be the expected new pensions
possibly calculated as amount expected to become new pensioners * average new pension
then
P(x,t) = P(x-1,t-1) * (1+i(t-1) * l(x,t)/l(x-1,t-1) + N(x,t)
Obviously for most ages n(x,t) will be zero. Also if retirement only allowed at exactly NRA
then P(NRA,t) = N(NRA,t) which could be what the notes describe with the formula
P(x,t) = P(x-1,t-1) * (1+i(t-1) * l(x,t)/l(x-1,t-1)
applying for x>NRA
Perhaps someone (a tutor perhaps) can shed some light on this.
Last edited by a moderator: Aug 28, 2007