This project was developed for my students in an introductory actuarial science course as an example of a hybrid pension plan, featuring both a defined-contribution component and a defined-benefit minimum.
This demonstration uses the McGill Pension Plan as an example. See this page for more details.
The following demonstration is for a McGill employee who started working at the age of 25 in 1979, and retired at 65 in 2019.
Other assumptions include
The total account value is used to purchase a life annuity immediately upon retirement.
The annuity factor is calculated using the single-year complete life tables
without regard to gender, assuming an effective annual interest rate of 5%.
The DC account earns the same investment return as the SP500 index from 1979 to 2019.
Although the earliest retirement age is 55 under this pension plan, we relax this assumption and allow employees to retire at any age. The defined-benefit minimum is reduced by 3% per year before 65.