Actuarial Notes

Pension Mathematics for Actuaries

By Arthur W. Anderson · ACTEX Publications · 2006

Study guide: Exam RET-201

An intermediate-level textbook covering the mathematics of pension funding and valuation, including a discussion of ancillary benefits, contributory plans, assets, and the selection of actuarial assumptions. This is the third edition, published by ACTEX in 2006; ACTEX describes it as a required reading for several SOA exams.

On the syllabus

  • Exam RET-201 — Chapters 1, 2, 3, 4 and 7 for outcomes 1b and 1c; Chapter 2 also for outcome 3d.

1 Introduction

2 Actuarial Cost Methods

  • 2.1 Why and Wherefore
  • 2.2 Unit Credit
  • 2.3 Entry Age Normal
  • 2.4 More Entry Age Normal
  • 2.5 Individual Level Premium
  • 2.6 Frozen Initial Liability
  • 2.7 New Entrants
  • 2.8 More Frozen Initial Liability
  • 2.9 Aggregate
  • 2.10 Pensioners
  • 2.11 Pension Cost in Perspective

3 Contributory Plans

  • 3.1 Remarks
  • 3.2 Unit Credit
  • 3.3 Entry Age Normal
  • 3.4 Individual Level Premium
  • 3.5 Entry Age Normal with Salary Scale
  • 3.6 The Modified-Cash-Refund Annuity

4 Ancillary Benefits

  • 4.1 Ancillary to What?
  • 4.2 Vesting: Unit-Credit Method
  • 4.3 A Note about Multiple-Decrement Theory
  • 4.4 Vesting: Entry-Age-Normal Method
  • 4.5 Early Retirement
  • 4.6 Later Retirement
  • 4.7 Retirement as an "Ancillary Benefit"
  • 4.8 Other Ancillary Benefits

5 Assets

  • 5.1 What Are They?
  • 5.2 Smoothed Market Value
  • 5.3 The New-Money Method
  • 5.4 Group Annuity Contracts
  • 5.5 Individual Life-Insurance Policies
  • 5.6 The Big Picture

6 Assumptions

  • 6.1 Actuarial Science vs. Actuarial Art
  • 6.2 An Actuarial Paradox
  • 6.3 The Service Table
  • 6.4 Secondary Decrements
  • 6.5 Interest, Inflation, and Salary Increases

7 Cost Methods in Current Actuarial Practice

  • 7.1 Who Should Be Included?
  • 7.2 More Unit Credit
  • 7.3 More Individual Level Premium
  • 7.4 Choosing a Cost Method

Acknowledgements

Index to Principal Notation

Index

Sources