Planit:Malaysian Civil Servant Pension Case Study
From Planipedia
This case study is specific to financial planning in Malaysia, so has fixed values rather than indices by country. For a similar case study applicable to other case studies, please see Planit:Calculating and Entering Defined Benefit Pension Plans, Planit:UK Defined Benefit Pension Plans Case Study, or Planit:Entering Other Revenues Case Study.
Example Problem One:
Abdul Haqq now wants to include the pension he will receive on retirement based on being a civil servant. This added accuracy will ensure that the predicted ability of your client’s to meet their goals is not underestimated, and overcompensated for by reducing current lifestyle or goals. Abdul’s pension is based off of 22 years of service by retirement, and can be calculated from the formula: Annual pension = 1/600 X Months of service by retirement X Last salary
Solution Using Detailed Pension Information:
- Click Add above the existing revenue streams
- Enter an appropriate Description such as Abdul’s Pension
- The Owner drop-down list can stay at its default.
- In the Amount Per Year field, enter the result of the calculation for (1/600 X 12 months/year X 22 years X 90,000 = 39,600). This RM 39,600 does not exceed the limit of one half of the salary, so can be entered as the Amount Per Year
- Set the From Year to start at his retirement or at her age 57.
- Set the To Year to Abdul’s assumed mortality or age 85.
- The Index Rate can be set to zero, since the pension amount isn’t indexed.
- The pension is not taxable, so the Percent Taxable should be 0%
- The Amount on Death and Amount on Disability should both be set to 100%.
- The Model As option should be set to Start During Retirement since only the start year will be pushed back in the event that retirement is delayed.
- The Additional Increase field allows you to identify if the value of the pension will increase annually if the retirement is delayed, since the client will be working longer. While you can proceed to calculate this amount based on the formula, the affect is negligible, so here will be left at 0%.
- Click Save to return to the summary Pensions and Other Revenues
Go to the exercise to test your knowledge on Malaysian civil servant pensions.
