This Milliman study, authored by Danny Quant, Joanne Gyte, and Simon Herborn, covers the 50 companies featured in the SET 50 index as of 31 December 2556 Buddhist Era (31 December A.D. 2013). The main aim of the study is to educate and create awareness about the state of employer-sponsored long-term employee benefits programs and foster a healthy dialogue among policy builders, employers, employees, and the general public about the future of such plans in Thailand.
Longevity risk is a primary exposure for state-managed pensions within Gulf Cooperation Council (GCC) countries. In this Middle Eastern Insurance Review article, Milliman’s Simon Herborn, Khurram Mirza of Osool, and Fahad S. Alajlan of the General Organization for Social Insurance (GOSI) discuss how refinements to benefit structures can improve the sustainability of GCC pensions.
With a framework that delivers a meaningful view of life expectancy, we can prepare better forecasts of future financing requirements. As previously mentioned, this analysis is likely to reveal the schemes are not self-sustaining—that is, co-contributions will be required from the state. If these are deemed too onerous, the next recourse is higher contribution rates from the participants or employers. Failing this, the natural progression is refinements to the benefit structure to reduce costs.
One route could be raising the retirement age. All else being equal, this would shorten the time span for which benefits will be paid and thereby lead to a reduction in costs (though it should be noted that the full cost implications are deceptively complex and careful consideration is required to achieve the desired effects). This type of intervention has been very common in other parts of the world, among both state- and employer-sponsored schemes.
There are many other ways in which the benefits can be refined to help manage costs – for instance, changing the definition of salary for determining benefits (for example, an average of salaries over the individual’s career rather than just at retirement age), limiting cost-of-living increases, making dependent benefits less generous (though this coverage often has significant importance, particularly in this region), and penalising early retirements. These changes do not directly target longevity exposure but can still be very effective in reducing the overall quantum of exposure.
This paper by Milliman consultants Danny Quant and Simon Herborn provides an update for the quarter ended June 30, 2014, on discount rate changes as they apply to liabilities under AS15(R), India’s accounting standard for the cost of providing employee benefits. Implied yields have fallen since March 31, 2014. The impact of this fall will depend on the weighted average expected future working lifetime (WAEFWL) of employees.