Good Practice Principles in Modelling Defined Contribution Pension Plans.
Kevin Dowd & David Blake
Abstract
We establish 16 Good practice principles for modelling defined contribution pension plans. These principles cover the following issues: model specification and calibration; modelling quantifiable uncertainty; modelling member choices; modelling member characteristics, such as occupation and gender; modelling plan charges; modelling longevity risk; modelling the post retirement period; integrating the pre- and post-retirement periods; modelling additional sources of income, such as the state pension and equity release; modelling extraneous factors, such as unemployment risk, activity rates, taxes and welfare entitlements; scenario analysis and stress testing; periodic updating of the model and changing assumptions; and overall fitness for purpose.
Keywords:
defined contribution pension plans; PensionMetrics methodology; OECD Roadmap for the Good Design of Defined Contribution Pension Plans; EOPA Good practices on Information Provision for DC Schemes: Enabling Occupational DC Scheme Members to Plan for Retirement
