CONSTRUCTION OF PENSION CALCULATION MODEL FOR CIVIL SERVANT LECTURERS USING STOCHASTIC INTEREST RATES AND THREE TYPES OF FUNDING METHODS

• Main Author: Mukhlisah
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/84065
• Institution: Institut Teknologi Bandung

Effective and sustainable pension fund management requires accurate actuarial calculations that consider interest-rate fluctuations. This study aims to analyze the calculation of pension fund reserves for civil servant lecturers (PNS) at a public university in Indonesia using actuarial methods based on stochastic interest rate models. The data used included those from 2019 on civil servant lecturers. To project future interest rates, this study applies two stochastic interest rate models, the Vasicek and Cox-Ingersoll-Ross (CIR). The Vasicek model was chosen for its simplicity and ability to produce stable results despite the possibility of generating negative interest rates. On the other hand, the CIR model was selected for its advantages under low-volatility conditions. Subsequently, pension fund reserve calculations were performed using three actuarial methods–Accrued Benefit Cost (ABC), Projected Unit Credit (PUC), and Entry Age Normal (EAN)–selected to evaluate pension liabilities from different perspectives. The results show that only 29.4% of the 180 civil servant lecturers in 2019 successfully reached the highest rank of IV/d or IV/e and were promoted to Professor before retirement, while the remainder only reached ranks III/a to IV/c. A comparative analysis of actuarial methods, namely ABC, PUC, and EAN, indicated that the ABC and PUC methods tended to yield similar pension benefits, whereas the EAN method resulted in lower benefits, especially for lecturers with shorter work periods or lower average salaries, over the last 10 years. Additionally, this study compares the CIR and Vasicek interest rate models for predicting interest rate movements and their implications for normal contribution calculations and pension fund reserves. The CIR model demonstrates superiority in the stability and accuracy of interest rate predictions compared with the Vasicek model. Nevertheless, the Vasicek model produces more stable pension fund reserves with smaller fluctuations, making it a more suitable choice for risk management in pension programs. This study guides decision-makers in selecting models and methods that align with risk profiles and financial goals in pension fund management.