Abstract
Private pension schemes focus on retirement savings. Perceptions of health status change over time and, as retirement age approaches, concerns about Long-Term Care grow. However, once near retirement age, there isn’t enough time to plan sufficiently in advance. This paper proposes a mechanism to transform the private pension of a Defined Benefit scheme (retirement, invalidity) into an allowance. In turn, should the need arise on becoming dependant, this allowance will pay for any Long-Term Care services the beneficiary might require. Depending on the pensioner’s situation, both the expected number of payments and their intensity are transformed. For this purpose, a mechanism is defined, through a multiple state Markov model, to adapt the amount of the pension to the revised life expectancy of the beneficiary. The revised life expectancy would be derived from his/her new health status. The main contribution of this work is to establish a private Defined Benefit pension scheme model capable of transforming its benefits, adding Long-Term Care support, without increasing the total pension cost to the scheme.
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De La Peña, J.I., Fernández-Ramos, M.C., Garayeta, A., Martín, I.D. (2022). LTC of a Defined Benefit Employee Pension Scheme. In: Corazza, M., Perna, C., Pizzi, C., Sibillo, M. (eds) Mathematical and Statistical Methods for Actuarial Sciences and Finance. MAF 2022. Springer, Cham. https://doi.org/10.1007/978-3-030-99638-3_31
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