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Q: how do they calculate pension transfer value in redundancy situation?

  • 16-05-2007 07:15PM
    #1
    patto_chan
    Registered Users, Registered Users 2 Posts: 256 ✭✭


    Hi,
    Being laid off soon. My employer will cease business completely, the pension fund will be closed and me and my colleagues will given a bond of the transfer value of our pension fund to put into our future employer's pension scheme or into an individual pension (PRSA).

    I was wondering how do they reach this transfer value calculation?
    Any actuaries out there care to enlighten me? I'm an engineer so am not scared of maths. Our pension managers did explain it to me and I think I understand the concept but would like to see the equation(s) used.

    What I know is:
    My pensionable salary at termination date.
    Years of service with current employer.
    Years to go until I reach 65.
    No AVCs.
    Male

    I got some information of the Irish Society of Actuaries website on Market Value Adjustment and I know other factors are used in the calculation (based on age. sex, inflation rates etc).

    But can anyone tell me the equation?
    i.e. is it something like T = A*B*C*(1+r1)^n1/(1+r2)^n2 ????

    ...or will divulging it break the Actuarial code of secrecy and cause sinister figures to come knocking at my door in the dead of night?


Comments

  • #2
    Blackjack
    Registered Users, Registered Users 2 Posts: 3,640 ✭✭✭Blackjack


    Are they not just going to calculate it based on the value of your Policy at the closing date?


  • #3
    patto_chan
    Registered Users, Registered Users 2 Posts: 256 ✭✭patto_chan


    Blackjack wrote:
    Are they not just going to calculate it based on the value of your Policy at the closing date?

    Yes I know the pensionable salary at my termination date. But, hypothetically speaking, if I was to draw this on retirement it would be significantly smaller as (in my case) 25yrs+ would have passed with no further contributions being made.
    Then they calculated what this smaller annuity's capital value (lump sum value) would be on the date of my retirement. Then they got the present value of this hypothetical future lump sum to determine my pension transfer value at the date of my employment termination.

    That's how I understood it. Just curious to know what equations they used (and therefore to see how they got their exact figures). :)


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