pension modes​

The purpose of the “Payment forms” section of the Benefit Definition is to specify whether there are other payment forms (besides the Normal form), called Optional forms, on which you assume benefits will be paid, instead of valuing all benefits on the Normal form.

In the U.K. pension mode, this section also contains the Commutation applies check box, which indicates whether, for benefits other than death and in-service benefits, a portion of the benefit should be commuted and paid as a lump sum upon commencement. If this box is checked, the remaining portion of the benefit will be paid as an annuity, based on the Normal form, or on Optional forms, if any are selected; see the discussion in the next paragraph. The parameters used to commute the benefit are specified under the Commutation topic of Valuation Assumptions.

Optional forms lists the Optional Payment forms that have already been identified as a part of this Benefit Definition. In the pension modes, The Type column shows the short-form version indicating the form of payment under which that benefit is paid (e.g. LA for Life Annuity, JL for Joint and Survivor Annuity, LS for Lump Sum, etc...). The Modified column shows the date of the most recent modification to the library entry. To edit an existing Optional form or to omit it from the Benefit Definition, double-click the library entry or select the entry and click the Edit button. To create a new Optional form, click the New button. To add or omit Optional forms from the predefined Payment Forms, click the Add/Omit button, which leads you to a list of Payment forms unhidden in the current Project. Check off any Optional forms to include in the Benefit Definition and uncheck any Optional forms you wish to omit. See Payment Form Definitions - pension modes for more information.

Note that life insurance and modified cash refund annuity payment form types are not permitted as optional payment form selections (nor can you define optional payment forms if the Normal form is one of these types). Additionally, the payment form selected as the Normal form cannot be selected as an optional payment form.

Note that any valuation or projection assumption COLAs applied in a Benefit Definition under Cost-of-Living Adjustments (COLAs) (in U.K. mode, Pension Increase applied in a Benefit Definition under the Pension Increases topic of Valuation Assumptions) will be ignored when calculating the conversion factor, but will be included in the payment form value of the optional payment form.  There is one exception to this treatment:  when the normal form is an annuity with a COLA and the optional form is a lump sum without installments, the conversion factor will reflect the COLA assumption. If you wish to exclude COLAs from a lump sum optional form, instead of coding an Optional form under this Benefit Definition, create separate Benefit Definitions for the normal form and the lump sum optional form and, in the lump sum's Benefit Definition, use a lump sum factor component, with COLAs applied to the lump sum's underlying annuity, to convert the benefit.

In all modes, also note that for a Benefit Definition initiated by the ”Death” Contingency, mortality rates used to calculate present values of the normal and optional payment forms are spouse / beneficiary, not member, mortality rates (a consequence of the fact that this benefit is payable to the beneficiary, the member having died). To use member mortality instead, such as to value a lump sum death benefit that is the present value of the member’s annuity benefit payments, create a separate Benefit Definition for the lump sum benefit and, in the Benefit formula expression, use a lump sum factor Benefit Formula Component (rather than coding only one Benefit Definition, with an annuity normal form and a lump sum optional form), which has a parameter for purposes of selecting member or beneficiary mortality.

The valuation assumptions, and in a Core Projection, experience assumptions used to convert from the normal form to an optional form, as well as a selected optional form’s post-decrement probability of receipt, are specified under the Valuation Assumptions and Projection Assumptions commands, respectively.