Planit:Malaysian Civil Servant Pension Exercise Answer Key

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.

Question One:

Your client expects to receive a pension when he retires in 5 years, at age 55. At that age, he will have worked at his place of business for 30 years. His current salary is RM 60,000. Calculate the amount of the pension as an annual revenue and lump sum payment. Note: If calculating the lump sum amount of a pension the formula is 7.5% x number of months worked at retirement x last working salary.

What did you enter for the following data entry fields, for each type of pension?

Amount Per Year: $ ____________ $ ____________

From Year: _________ _________

To Year: __________ _________

Percent Taxable: _______% _______%

Model As: _______________________ _______________________

Answer:

For the annual pension revenue:

Amount Per Year: RM 30,000 (Even though 60,000 x 12 months x 30 x 1/600 = RM 36,000, the maximum annual pension is half the annual salary, so he would only receive RM 30,000)

From Year: 5 years from now

To Year: 50 years from now (Assume mortality at age 90)

Percent Taxable: 0%

Model As: Start During Retirement

For the lump sum pension revenue:

Amount Per Year: RM 1,620,000 (60,000 x 12 months x 30 x 7.50% = RM 1,620,000)

From Year: 5 years from now

To Year: 5 years from now

Percent Taxable: 0%

Model As: Defer with Retirement