Abstract
Because pension plans have been marketed using outdated technical premises, Brazilian insurance companies find themselves required to identify additional resources to ensure their ability to meet future benefit payments obligations. When calculating the additional amount of this provision, the parameters used are: mortality and disability decrements, the structure of interest rates, financial performance, cancellation fees and conversion rates. The aim of this study is to present the estimation of conversion rates based on a Probit Model. The data for this study was obtained through the transfer of restricted data from the portfolio of a company with relevant activity in the Brazilian insurance market, including a group of 14,511 individuals eligible for retirement in the period between January 1, 2005 and December 31, 2009. The resulting analysis of the data allows us to conclude that two factors - the volume of accumulated reserves and the classification of prices as actuarially fair - increase the propensity of an individual to convert resources upon retirement. In turn, retirement age and the need for liquidity reduce the propensity to convert resources upon retirement.
Highlights
Since the advent of commercialized private complementary pension plans in Brazil between the 1970s and 1980s, pension institutions have been obliged to define a number of factors at the time of product approval
They must define the technical premises of the mortality table and the interest rate that will be used at the time of retirement to determine the benefit value or the income paid to the individual contingent upon survival of the participant
The results indicate that for neutral individuals or risk-takers, where technical premises of mortality reflect their reality, a programmed withdrawal option is more appealing, in part because of the flexibility offered by this payment method
Summary
Since the advent of commercialized private complementary pension plans in Brazil between the 1970s and 1980s, pension institutions have been obliged to define a number of factors at the time of product approval. They must define the technical premises of the mortality table and the interest rate that will be used at the time of retirement to determine the benefit value or the income paid to the individual contingent upon survival of the participant. The technical premises used for the original calculation of the benefit and the provision of benefits did not change from those defined when the contract was made years, sometimes even decades, before the date of retirement
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