Chapter 18 Section 7.2

[GTB_Actuarial]

I'm not sure I understand what the final sentence is implying and its link to the section 'data requirements for employee benefit schemes'. The sentence is as follows:

'However, if a pension were also to be paid to a spouse after the death of the member, the existence and age of a spouse of a young member may not be financially significant as the marital status of the member may change in the future.'

I would've thought it is significant to have data on age/existence of a spouse given their could be a spouse entitlement. Does this sentence really mean: having data on age/existence of spouse is less significant because member and spouse may become divorced/separated at some point prior to the member's death?

 

[Lindsay Smitherman]

Hi, yes that is broadly what it is saying, although I would also (sadly) add '/widow(er)ed' to the list PLUS it will also mean marital status transitions in the other direction: single to married.

Bear in mind that we are talking about 'young members' here, and there is a pretty high probability that the marital status or partner of someone who is now 25, say, will be different when they are 65.

For young members, rather than obtaining and using actual data on their current marital status and, where applicable, age of spouse, the pension scheme is more likely to simply make an assumption about the % who will be married at retirement and the average age difference of spouse to member at that point.

Bear in mind also that the assumptions are being made to determine contributions as the benefits accrue, and it will likely be a long time before any dependants' benefits would be paid for these young members. So there is plenty of time to move towards more accurate projections of the cost of their benefits (including for dependants) as they get closer to retirement age, and to adjust the contributions accordingly.

Hope that helps.

 

[GTB_Actuarial]

Thanks Lindsay that is helpful.