Research Article

Securing the Future: A Sensitivity Analysis of Actuarial Money Worth Ratios in Defined Contribution Pensions for Public University Employees

Joshua Solomon Adeyele1*, Mohammed Nasirudeen Maiturare2, Gbenga M. Ogungbenle3
1 University of Jos
2 Ahmadu Bello University Zaria
3 Actuarial Science Department, University of Jos
* Corresponding author: adesolojosh@gmail.com
Published: Apr, 2024
Pages: 12-21

Abstract

As policymakers scramble to combat pension deficits, defined contribution pensions emerge as a promising solution. But what drives their success? Our study reveals that total contributions and investment returns are the twin engines of this scheme. However, a mismatch between projected and actual returns can have disastrous consequences. Three crucial parameters were identified - rates of return, annuity rates, and life expectancy - that determine the future value of pension contributions. Our findings show that higher interest rates and longer contribution periods significantly boost money worth ratios, while early retirement can lead to a substantial decrease in pension income. Conversely, normal retirement can provide retirees with up to 100% of their final salary. This research highlights the critical role of funding gaps, interest rates, and life expectancy in ensuring retirement income adequacy, making it a must-read for policymakers and stakeholders.

Keywords

money worth ratio defined contribution income adequacy pension deficits

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How to Cite

Adeyele, J. S., Maiturare, M. N., & Ogungbenle, G. M. (2024). Securing the Future: A Sensitivity Analysis of Actuarial Money Worth Ratios in Defined Contribution Pensions for Public University Employees. Nigerian Actuarial Journal, 1(1), 12-21.

J. S. Adeyele, M. N. Maiturare, and G. M. Ogungbenle, "Securing the Future: A Sensitivity Analysis of Actuarial Money Worth Ratios in Defined Contribution Pensions for Public University Employees," Nigerian Actuarial Journal, vol. 1, no. 1, pp. 12-21, April 2024.

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