Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek

This dissertation proposes the optimisation of the contribution rate for Social Security Organisation (SOCSO)'s Invalidity Pension Scheme (IPS). In performing this study, four objectives were set. Firstly, this study aims to statistically analyse the current situation of the contribution fund c...

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Main Author:	Awang Chek, Mohd Zaki
Format:	Thesis
Language:	English
Published:	2017
Subjects:	Labor market Labor supply Labor demand, Including unemployment, manpower policy, occupational training, employment agencies
Online Access:	https://ir.uitm.edu.my/id/eprint/41063/1/41063.pdf
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id	my-uitm-ir.41063
record_format	uketd_dc
spelling	my-uitm-ir.410632023-01-19T08:07:19Z Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek 2017 Awang Chek, Mohd Zaki Labor market. Labor supply. Labor demand, Including unemployment, manpower policy, occupational training, employment agencies Social insurance. Social security. Pension This dissertation proposes the optimisation of the contribution rate for Social Security Organisation (SOCSO)'s Invalidity Pension Scheme (IPS). In performing this study, four objectives were set. Firstly, this study aims to statistically analyse the current situation of the contribution fund collection and the claim benefits payment under SOCSO's IPS. Secondly, it seeks to develop an actuarial formulation based on the benefits coverage from SOCSO's IPS. Thirdly, it attempts to determine an optimal contribution rate to support the benefits provided under SOCSO's IPS using an actuarial approach. Fourthly, it proposes an appropriate contribution rate to be implemented by SOCSO. Currently, the contribution rate for SOCSO's IPS is 1%, which is shared equally between employer and employee. This contribution rate is directly deducted from the employee's monthly gross salary. This contribution rate needs to be adjusted upwards by SOCSO in the near future to ensure that all payments of claims are sufficiently covered. Based on the 9th Actuarial Valuation Report issued by the International Labour Organisation (ILO), recent statistics show that immediate revision of contribution rate is necessary in order to achieve the minimum loss ratio (max 20%) in SOCSO's IPS funding systems. In this study, the Actuarial Present Value Approach is applied to all benefits under SOCSO's IPS. SOCSO data from 1985 until 2014 are used in this study. Seven assumptions are made in this study, namely mortality rate, salary ceiling, interest rate, retirement age, increment salary rate, age entry, and salary entry. By optimising the worst-case scenario (single simulation), this study has found that the optimal contribution rate is 2.2% rather than the current 1%. This can be attributed to the fact that since 1969, many changes have occurred in the workplace, working conditions are different and many new jobs have been created. Therefore, an Actuarial Present Value Approach with regards to actuarial modeling was conducted to optimise SOCSO's IPS contribution rate. In conclusion, an optimal contribution rate of 2.2% should be introduced and implemented in the future as part of the efforts to reduce society's burden whilst ensuring that adequate protection is provided to the nation's workforce. 2017 Thesis https://ir.uitm.edu.my/id/eprint/41063/ https://ir.uitm.edu.my/id/eprint/41063/1/41063.pdf text en public phd doctoral Universiti Teknologi MARA (UiTM) Arshad Ayub Graduate Business School (AAGBS) Abdul Rahman, Zuriah
institution	Universiti Teknologi MARA
collection	UiTM Institutional Repository
language	English
advisor	Abdul Rahman, Zuriah
topic	Labor market Labor supply Labor demand, Including unemployment, manpower policy, occupational training, employment agencies Labor market Labor supply Labor demand, Including unemployment, manpower policy, occupational training, employment agencies
spellingShingle	Labor market Labor supply Labor demand, Including unemployment, manpower policy, occupational training, employment agencies Labor market Labor supply Labor demand, Including unemployment, manpower policy, occupational training, employment agencies Awang Chek, Mohd Zaki Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
description	This dissertation proposes the optimisation of the contribution rate for Social Security Organisation (SOCSO)'s Invalidity Pension Scheme (IPS). In performing this study, four objectives were set. Firstly, this study aims to statistically analyse the current situation of the contribution fund collection and the claim benefits payment under SOCSO's IPS. Secondly, it seeks to develop an actuarial formulation based on the benefits coverage from SOCSO's IPS. Thirdly, it attempts to determine an optimal contribution rate to support the benefits provided under SOCSO's IPS using an actuarial approach. Fourthly, it proposes an appropriate contribution rate to be implemented by SOCSO. Currently, the contribution rate for SOCSO's IPS is 1%, which is shared equally between employer and employee. This contribution rate is directly deducted from the employee's monthly gross salary. This contribution rate needs to be adjusted upwards by SOCSO in the near future to ensure that all payments of claims are sufficiently covered. Based on the 9th Actuarial Valuation Report issued by the International Labour Organisation (ILO), recent statistics show that immediate revision of contribution rate is necessary in order to achieve the minimum loss ratio (max 20%) in SOCSO's IPS funding systems. In this study, the Actuarial Present Value Approach is applied to all benefits under SOCSO's IPS. SOCSO data from 1985 until 2014 are used in this study. Seven assumptions are made in this study, namely mortality rate, salary ceiling, interest rate, retirement age, increment salary rate, age entry, and salary entry. By optimising the worst-case scenario (single simulation), this study has found that the optimal contribution rate is 2.2% rather than the current 1%. This can be attributed to the fact that since 1969, many changes have occurred in the workplace, working conditions are different and many new jobs have been created. Therefore, an Actuarial Present Value Approach with regards to actuarial modeling was conducted to optimise SOCSO's IPS contribution rate. In conclusion, an optimal contribution rate of 2.2% should be introduced and implemented in the future as part of the efforts to reduce society's burden whilst ensuring that adequate protection is provided to the nation's workforce.
format	Thesis
qualification_name	Doctor of Philosophy (PhD.)
qualification_level	Doctorate
author	Awang Chek, Mohd Zaki
author_facet	Awang Chek, Mohd Zaki
author_sort	Awang Chek, Mohd Zaki
title	Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
title_short	Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
title_full	Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
title_fullStr	Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
title_full_unstemmed	Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek
title_sort	optimizing contribution rate of socso's invalidity pension scheme (ips): an actuarial present value (apv) modelling / mohd zaki awang chek
granting_institution	Universiti Teknologi MARA (UiTM)
granting_department	Arshad Ayub Graduate Business School (AAGBS)
publishDate	2017
url	https://ir.uitm.edu.my/id/eprint/41063/1/41063.pdf
_version_	1783734609999036416

Optimizing contribution rate of Socso's Invalidity Pension Scheme (IPS): an Actuarial Present Value (APV) modelling / Mohd Zaki Awang Chek

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