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Question: Do you calculate defined benefit pension valuations for joint lives (survivorships)?
Answer: Currently, we calculate defined benefit pension valuations for single lives only.
Typically, the survivor piece is not worth all that much, because:
- It begins to run far in the future, at which point the discounting to the present is substantial; and
- It typically runs only for a few years, from the time the participant dies until the time the survivor dies; and
- If the participant is female and the survivor is male, the likelihood is that there will not be any survivor benefit at all, since on average women live longer than men.
One way you could roughly approximate the value of the survivorship pension is to create a second pension, as follows:
- Make the survivor be the owner of the second pension.
- Have the retirement age be the age the survivor will be when, according to your best guess, the participant will die.
- Set the various date entries so that the coverture fraction is 100% (that is, have the pension start date be after the marriage date, and select the first option, "cut-off date," for "participant has to work until what date...").
That will give you a rough guess, at least, as to the value of the survivor benefit.
You can try changing the "retirement age," to see the impact of different dates that the survivor pension might begin paying on the value of the survivorship piece.