Partial Pension

Specialeforsvar: Thea Hovmand Larsen

Titel: Partial Pension

Abstract: Flexible retirement arrangements can serve as a remedy to adapt to changing life course patterns and handle the consequences posed by population ageing. To assess the effects of implementing such arrangements for with-profit insurance, we establish a suitable valuation method for a multi-state life insurance model incorporating partial pension, a flexible retirement scheme.
The model encapsulates stochastic retirement and accounts for various likely retirement ages by considering the timing of full and partial retirement as incidental policyholder behaviours.
In place of the usual transition rates, we employ cumulative transition rates. The management is accomplished via scaling functions, determined to maintain actuarial equivalence on a technical, safe side basis. Additionally, a partial retirement factor is introduced to regulate the size of partial pension. The approach leads to modifications of Kolmogorov’s equations and the
expected accumulated cash flows. Collecting results, we obtain a valuation method for incidental full and partial retirement. Significant impacts are observed within specific life insurance portfolios, which require consideration when introducing the flexible retirement option, partial pension, into the Danish pension system.

Vejleder: Christian Furrer
Censor:    Jingyu She