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Employee Benefit Plans IAS 19

Plan Design,
Actuarial Valuation VS Accounting,
Funding VS Provisions,
Insurance Plans
AND ICAP KSA CHAPTER 13 December 2016
Abdul Rahim Abdul Wahab
Actuarial Consultant
Fellow of Society of Actuaries, USA (1995)
Cell # 0092 320 926 27 23
Inherent Advantages of Group Insurance
Risk Management
needs and risks

death, disability, medical, savings, retirement

Gaps and Duplications

Funded vs Un-funded Accounting vs Actuarial
9. Communicate to employees
Saudi Arabia
EOS Gratuity Benefit
GOSI Pension
Plan Design
Minimum Expatriates

Salary is last drawn basic wages and excludes commissions, sales percentage, etc.
Portions of the year to be paid as well.
RR of 18% with 30 years of service cost is 8.33% of salaries
Estimated USD 25 billion liability in 2016 for Saudi EOSB which is unfunded.
Other Gratuity Benefit Schemes
Length of Service Gratuity Entitlements

Less than 2 years Nil

Greater than 2 years but < 5 years 15 days last drawn Gross

Greater than equal to 5 years but < 10 years 30 Days last drawn Gross

Greater than equal to 10 years but < 15 years 35 Days last drawn Gross

Greater than equal to 15 years but <20 years 40 Days last drawn Gross

Greater than equal to 20 years 45 Days last drawn Gross

Replacement Ratio of 27% or so.

Saudi GOSI Benefits

Reducing Benefits and Increase contributions is the only solution.

Other Pension Schemes
IFRS adoption in Saudi Arabia


Impact depends on:

Existing Accounting basis, Assumptions, demographics of the case all impact.
Main Objectives of EB Plan Design
Benefit Adequacy
Replacement Ratio
Retirement Benefits Objectives
Retirement Planning

Retirement Planning

Retirement ?
L% survive from Age 30 to Age 60.
Only 1-L% never see retirement (death, disability, health benefits).
God does not wish to identify which group we belong to !!
Even if second group, concern to have families to support
Wives may live W yrs longer - men can RIP but still need to leave
something behind !!! Or Else ?
Do you wish to Retire before you Expire ? Or Expire before you
Retire ? Plan for both.
Focus on overall schemes and what they would achieve in real terms

Retirement Benefits Objective
Financial security to meet Self & Family Needs.
Needs at Retirement may be:
Income as well as Lump sum
Living expenses, childrens needs and Medical Expenses
Three legged stool is typical:
Government provided Social Security
Employer Retirement Plans
Personal Savings
Others - family assets, father in law !!
Value at end depends a great deal on regular savings and careful
investment and regular monitoring
RR used to compare the value of benefits from different retirement
schemes as well as adequacy of benefits in real terms

Measure of income expressed as % of Net income prior to

retirement to maintain standard of living. Deduct Tax and
employment expenses.

Net income before retirement SR. 10,000 per month starts receiving
SR. 7,000 after retirement by converting lump sums into a life annuity
for family, the replacement ratio is 70%.

A replacement ratio between 75 to 80% for lower income and 60 to

70% for higher income may be considered as fairly reasonable.
Employer Considerations
Reasonable Replacement Ratio (RR) for a reasonably
long period of service such as 25 to 30 years. Factors:
Regulation and Tax laws
Market practices - industry and benchmark
Cost constraints - retirement plus other benefits
Cash vs Deferred compensation objectives?
HR retention policy for different categories of people
(PF vs Gratuity vs Pension - vesting schedules)
Union negotiations
Higher RR for lower paid and vice versa
Social Objectives may not be addressed.
Employees Concerns
Ensure retirement Income needs reasonably met by:
Government and Employer plans
Personal savings for supplementary needs
Security and guarantee of receiving when due (Trust Fund)
Tax effective deferral of income s/b available
Forced savings mechanism easier + voluntary addon savings
Flexibility in scheme to suit needs Lump sums
Post Retirement Medical expenses are met (contingent)

Saudi EOS Benefit Replacement Ratios
Income Replacement Maths

Monthly Basic salary Rs. 10,000. Gross : Basic Ratio 1.50 : 1.00
Net Income for RR= Gross less Tax @10% of Basic

Benefit Entitlement
EOBI 2.00% multiplied by min(basic,3000) for each year of service
Provident Fund Employer only monthly contributions @ 10% of basic salaries
Gratuity Last drawn basic salary for each completed year of service

Pension 1.70% of Basic salary for each year of service

Leave Encashment 50% of leave balance on gross (max. of 180 days encashment)
Medical (Hosp / Prol) Annual cost of insurance for life self and spouse

Medical ( Med / Cons) 2 months basic paid on annual basis

Benevolent Monthly grant of Rs. 1,620 for 10 years (certain)

Replacement Ratio (without indexation)

Replacement Ratios






30 Entry Age 40 50
EOBI PF Gratuity Pension LE Medical Benev Income Gap

Components of Replacement Ratio Without Indexation

Entry Age 35 years: Service at Retirement 25 years

Components of replacement ratio at Age 35

Income Gap EOBI

23% 5%


M edical
8% Gratuity
4% Pension
Replacement Ratio With future Indexation at 4%

Replacement Ratios






30 EOBI PF Gratuity Pension 40
LE Medical Benev Income Gap 50
Entry Age 30
Components of Replacement Ratio With indexation at

Entry Age 35 years: Service at Retirement 25 years

Components of Replacement Ratios

Income Gap 8%

Benev M edical
2% 5%

Meeting the Objectives
Way forward
Financial independence not achieved by current employer EOSB scheme.
Substantial gaps likely in Income needs
Major Medical expenses etc may be borne by children (with young children)
which is difficult for Low to Middle class families putting financial burden for
years to come.
Social family network good but is it likely to continue or should we prepare
ourselves to achieve financial independence from future generations ?
Employers/Regulation should consider the possibility of transfer of retirement
benefits between different employers with an incentive. Increases Savings in the
country and RR for employees.
Else employees who have changed a few jobs in mid thirties when they reach
retirement may not have a sufficient replacement ratio if not saved what received.

Meeting the Objectives
Way forward
GCC Expatriates
EOS benefit low 18% RR (10% with inflation adjustment)
Reliance on Savings / Accumulation during active service
Careful to save and invest for retirement while an Expatriate.
Employers to help in finding right savings vehicles else lots of
savings get depleted by wrong decisions / financial planners etc, who
do not disclose fully about there products with high commissions and
front end costs
Corporate Savings plans with Insurance component may be viable
options with mix of investment options based on life cycle.
GCC Locals schemes lucrative funding for payout could become a
major issue if funds not set aside based on Actuarial fully funded basis. 33
Cafeteria Plans; A missing concept
In the developed countries, the concept of Cafeteria Plans also generally referred to as flexible benefit
plans has become quite common.
This concept for all practical purposes does not exist in GCC and employers should consider at least
partial application of this concept in some areas of their employee benefit plans.
Such plans allow employees to avail those employee benefits that best meet their specific needs
instead of a single package of benefits that applies to all employees. For example, Cafeteria plans may
allow employees to select amongst the various group life, medical expense, disability, dental and other
plans that are offered. Cafeteria Plans may also allow employers to introduce new benefits to meet the
specific needs of the employees.
Although the details of the Cafeteria Plans may vary among employers, they have certain common
characteristics. First, the employer gives each employee a certain amount or credits that can be spent
on the different benefits or taken as cash. If taken as cash, the employers credits are taxed as income
to the employee.
Second, many cafeteria plans also make available an optional flexible spending account. A flexible
spending account also called a reimbursement account is an arrangement by which the employee
agrees to a voluntary reduction in salary, which can be used to pay for any plan benefits, unreimbursed
medical and dental expenses, dependent care expenses and other expenses.
Also, any additional amounts spent by the employee on the various benefits are generally with before
tax amount, which provide a significant tax advantage not relevant in GCC yet !!.
leading to

Reasonable Replacement Ratio

may lead to

Retirement In Peace Else

Rest in Peace
may be better

Actuarial Valuation VS
Accounting Provisions
Actuarial Valuation of Retirement Benefit Schemes

Actuarial Valuation reflects - Fair value of the liability in the accounts.

Current practice - Accounting liability if everyone leaves as of the
balance sheet date. Under or Over.
Actuarial provisions required as per IAS 19, which require an entity to
recognize a liability when an employee has provided service in
exchange for employee benefits to be paid in the future.
Termination liability does not fulfill this definition.
Systematic buildup of liability as opposed to accounting provision
which lead to irregular jumps 0, 1/6, 1/3, 1/2, 2/3, 1.
Regular charge annually in the P & L account over successive years
Actuarial valuation means that reporting as mandated by IAS / IFRS

Actuarial Valuation of Retirement Benefit Schemes
As an example, we have plotted a graph to illustrate the difference between the accounting provisions
and actuarial provisions for a sample employee with Saudi EOSB:

Age at joining (yrs) 24

Salary at joining (SR) 10,000

Salary Increases per annum 2.5%

Valuation rate of discount 4.5%

Retirement Age (yrs) 60

Actuarial Liability vs. Accounting Liability







1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Actuarial Valuation of Retirement Benefit Schemes
Using the tools of discounting and withdrawal / death probabilities, actuarial reserves are built up to the
eventual payout amount at retirement age.

Service Liabilities (in SAR) Actuarial Liability as %

(in Years) Actuarial Accounting of Accounting Liability
1 3,076 - 0%
5 23,320 19,498 120%
10 72,224 106,748 68%
15 154,149 216,463 71%
20 281,909 368,690 76%
25 477,310 576,743 83%
30 773,021 857,643 90%
36 1,321,944 1,321,944 100%

This illustration is for a single employee only. The overall savings would depend on the size of the payroll /
number of employees and their age and service profile.
Table of content
Objectives and scope

Post Employment
Short term Benefits
employee benefits EOSB, Pension, Medical, Life
Salary, leaves, medical, life,
Bonus payable within 12 mths

Other long term

employee benefits
Long serv leave, LTD
Termination, GHS
Objectives of IAS 19

The scope is broad and includes wages, Covers full-time, part-time,

vacation or holiday pay, bonus, temporary staff and
termination benefits, etc. as well as directors
retirement plans
Post-employment benefit plans (such as pensions and health
care) are categorized as either defined contribution plans or
defined benefit plans.

DB / DC Plan
Post-employment benefit plans (such as pensions and health
care) are categorized as either defined contribution plans or
defined benefit plans.

DB / DC Plan
Defined Contribution Plans
Employer liability to pay contributions Provident Funds
% of salary contributions by employer and employee
Investment direct or through Asset managers
Lump sum on exit
May have loans or withdrawals
Risks of Accumulation and Adequacy with the employee.
DC plans do not include plans with the following features:
Minimum level of benefit (regardless of fund balance)
Minimum return on fund balance by employer
Enhancement in benefits (constructive obligations).
Fully funded by definition No Actuaries !!
Accounting for DC plans:
Contribution is Cost
Contributions not paid is a liability
Accounting Treatment

when due Disclosure
Defined Benefit Plan
Employers obligation is to provide the defined benefits.
EOSB - Lump sum gratuity
Pension - a periodic payment (annuity for life, widow, children)
Benefits based on final (or average) salary and length of service.
Benefit uncertain as salary changes.
Other possible schemes:
Post retirement medical coverage for self and spouse
Encashment of accumulated leave balances
Defined Benefit schemes have Actuarial risk (costs change based on
actual cost of benefits) and Investment risk (assets under perform in
funded schemes or interest cost in unfunded schemes) for the
However, employee has no risk as there is certainty of benefit payout.
IAS19 comes in to measure the employers obligation and risks.
Funding VS Provisions
DC schemes usually fully funded as contributions received.
DB schemes unfunded, partially funded or fully funded
Funding protects the retirement benefits funds from the employer entity risks.
Funding may be in the form of:
Trust funds - employer and employee trustees
Insurance policies with funds managed separately or in a pool
Mutual funds managed by asset management companies
Investment Rules set by Trustees / Employer - conservative in a DB plan.
In a DC plan - employees may choose range, risks, returns.
Funding of EOSB is hardly seen in GCC.
Funds within the entity for business purposes (capital) and the liability
remains on its books. No incentive to Fund (yet !) ? Estimated USD 25 billion
Who pays if employer has financial difficulties ??
IAS19 Accounting for DB Schemes
EOSB Scheme

Plan Assets Plan Liabilities

Fair value at balance sheet Fair value of future obligations
date Less

Scheme Surplus or Deficit

on balance sheet.
Accounting VS Actuarial Liability
Accounting Provisions - based on the amount payable if all
persons left on the balance sheet date. Variations exist.
This creates gaps especially as benefit entitlement varies
with service.
IAS 19, requires determining the expected eventual
value of the DBO and then apportions it between past
and future service using a simple proportion (past
service to future service).
This method is called the Projected Unit Credit method
Calculations involving probabilities and discounting at
each point.
Expected value - probability times benefit at each point.
Benefit Apportionment
PBO and current service / past service cost:
Attribute benefit to periods of service under the plans
benefit formula.
If an employees service in later years will lead to a
materially higher level of benefit than in earlier years,
an entity shall attribute benefit on a straight-line
basis from:
the date when service by the employee first leads
to benefits under the plan until
the date when further service by the employee will
lead to no material amount of further benefits under
the plan, other than from further salary increases.
Assumed total
Annual Salary 120,000 Service 5
Salary Increase 4% Discount Rate 4%

Year 1 2 3 4 5

Salary 120,000 124,800 129,792 134,984 140,383

Acc. Undiscounted service
cost 11,699 23,397 35,096 46,794 58,493
Undiscounted service cost 11,699 11,699 11,699 11,699 11,699

Opening Obligation - 10,000 20,800 32,448 44,995

Interest Cost - 400 832 1,298 1,800
Discounted Service Cost 10,000 10,400 10,816 11,249 11,699
Closing Obligation 10,000 20,800 32,448 44,995 58,493
Year 1 2 3 4 5
Salary 120,000 124,800 129,792 134,984 140,383
Accounting Provision (full) 10,000 20,800 32,448 44,995 58,493
Actuarial Provision 11,699 23,397 35,096 46,794 58,493
Differential 1,699 2,597 2,648 1,800 -

Saudi EOSB Provision 0 3,467 5,409 7,501 9,751

16.67% 16.67% 16.67% 19,496
0 to 2 - -
2 to 5 1,734 1,803 1,875 1,950
5 to 10 3,899
10 +
Differential 11,699 19,930 29,687 39,294 38,997
Accounting Prov Min - - 1,803 1,875 1,950
Accounting Prov Max 1,734 3,899
Service cost

Current Past

Due to employee Due to change in

working extra year benefits
Net Interest on the Net Defined Benefit Liability

Interest cost Expected return

High yield High yield

interest rate interest rate
Fair value?

Market price if No market price?

available Use estimate
PV of Defined Benefit Obligation less
The fair value of plan assets (if any)
Net defined benefit Liability/ (Asset)
Surplus or deficit but with any adjustment for asset
Net defined benefit liability is to be recognized as a
liability in the balance sheet of the employer.
Similarly any net defined benefit asset is to be
recognized as an asset.
Income Statement Entries
Amounts to be recognized in profit or loss
Current service cost
Past service cost and gain or loss on settlement (if any)
Net interest on the net defined benefit liability (asset)
Current service cost cost relating to current year on new
The above to be determined using the current
assumptions (and not previous year assumptions)
Past Service Cost - change in the present value of the defined
benefit obligation resulting from a plan amendment or
Gain and loss on settlement Difference between
Present value of DBO on current actuarial assumptions; and
Amount of settlement
Income Statement Entries
Net interest on the net defined benefit liability (asset) shall be
determined by multiplying:
the net defined benefit liability (asset) by the discount rate
as determined at the start of the annual reporting period,
taking account of any changes in the net defined benefit
liability (asset) during the period as a result of contribution
and benefit payments.
On the liability side effectively the effect of unwinding of
the discounting for one year
On the asset side effectively the assumed investment
income earned on the asset
Income Statement Entries
Remeasurements of the net defined benefit liability (asset), to be recognised in
other comprehensive income:
actuarial gains and losses
return on plan assets, excluding amounts included in net interest on the net
defined benefit liability (asset)
any change in the effect of the asset ceiling
Actuarial gains and losses result from
Actual experience being different to that determined
A change in Actuarial Assumptions
Actuarial gains and losses do not include changes in the present value of the
defined benefit obligation because of the introduction, amendment, curtailment
or settlement of the defined benefit plan, or changes to the benefits payable
under the defined benefit plan.
Such changes result in past service cost or gains or losses on settlement.
Actuarial Assumptions
In estimating the liability assumptions need to be made relating to several parameters.
These can broadly be divided into
Demographic assumptions
Economic/Financial Assumptions
Withdrawal probability that a member will resign from service prior to
Mortality probability of death in service (for pension schemes also death post
Morbidity probability of early retirement due to ill-health
Medical claim incidence rates
Family mix and demographics important for pension schemes with family benefits
Rate/pattern of salary increase
Discount rate
Sometimes inflation (eg., inflation of medical costs in the case of a post
retirement medical scheme)
Increase in pensions post retirement
Setting Assumptions
Actuarial assumptions need to be unbiased and mutually compatible
Unbiased - neither imprudent nor excessively conservative
Mutually compatible most common issue in case of EOSB gap
between salary increase rate and discount rate
Assumptions need to be set with a view to:
Experience prevalent in the jurisdiction for which the calculations are being
carried out
Actual experience of the entity.
The Actuarys views about future development (eg.,
improvements in mortality)
Thestandard provides some guidance on setting assumptions but
judgement of Actuary (and accountants) is involved in final decision.
Setting Assumptions : Mortality
Gratuity / EOSB not impacted much by Mortality
Pension liabilities are significantly impacted by post
retirement mortality assumptions.
Mortality improvements can cause increase significant
increase in liabilities of Pension schemes.
GCC countries do not have published mortality tables
Even if there was, the actual population mix is diverse
nationalities with different underlying mortality expected.
We use reinsurance risk premium rates relating to group
insurance as a proxy for mortality in each country
Setting Assumptions : Discount Rate
Discount rate reflects the time value of money
Standard requires discount rate to be determined by
reference to market yields at the end of the reporting period
on high quality corporate bonds.
The duration of the liability needs to be calculated and the
bond of which the yield is to be taken should be of a
similar duration
In countries where there is no deep market in such bonds
Government bonds or Corporate bonds. Currency and term of
the corporate bonds or government bonds shall be consistent
with liabilities - employment benefit obligations.
The discount rate is one of the most key assumptions hence
needs to be set carefully Accountants vs Actuaries.
"there are no longer enough AA rated bonds so high quality should include A",
"I want to include more bonds to come up with my rate so I will include anything over 50m, rather than
"I used to look at yields between the 10th and 90th percentiles, now I am going to look at the 40th to 90th

There may be some good reasons to change, but "we need to

reduce the pension liability" is not one of them!
Setting Assumptions : Salary/Pension Increases
An entity shall disclose information that:
explains the characteristics of its defined
benefit plans and risk associated with them
identifies and explains the amounts in its
financial statements arising from its defined
benefit plans
describes how its defined benefit plans may
affect the amount, timing and uncertainty of
the entitys future cash flows
Characteristics of DB plans and
Associated Risks
Information about the characteristics of its defined benefit plans, including:
the nature of the benefits provided by the plan (eg final salary defined
benefit plan or contribution-based plan with guarantee).
a description of the regulatory framework in which the plan operates, for
example the level of any minimum funding requirements, and any effect of the
regulatory framework on the plan, such as the asset ceiling (see paragraph 64).
a description of any other entitys responsibilities for the governance of the
plan, for example responsibilities of trustees or of board members of the plan.
a description of the risks to which the plan exposes the entity, focused on any
unusual, entity-specific or plan-specific risks, and of any significant
concentrations of risk.
Eg., if plan assets are invested primarily in one class of investments, eg
property, the plan may expose the entity to a concentration of property
market risk.
a description of any plan amendments, curtailments and settlements.
Amount, Timing and Uncertainty of
Future Cash flows
An entity shall disclose:
a sensitivity analysis for each significant actuarial assumption.
the methods and assumptions used in preparing the sensitivity
analyses required and the limitations of those methods.
Changes from the previous period in the methods and assumptions
used in preparing the sensitivity analyses, and the reasons for such
To provide an indication of the effect of the defined benefit plan on the
entitys future cash flows, an entity shall disclose:
a description of any funding arrangements and funding policy that
affect future contributions.
the expected contributions to the plan for the next annual reporting
Transition to IAS19
Most entities, prior to adopting the standard, would account for
it on the basis of the liability payable if all employees left on the
balance sheet date. Variations exist.
There would almost certainly be a difference between the liability
determined in this way and that per the PUC method.
Our understanding is that adoption would be a change in
accounting policy and therefore the difference as at the beginning
of the accounting period in which it is recognized should be
adjusted against opening retained earnings and the prior years
results also restated.
However in practice clients in theGCC take the difference to OCI
in the first year in which the standard is adopted.
Valuation Date 31-12-16 Employee No. DOJ DOB Age Service Actuarial Liab Accounting Liab Transition Liab Current Srv Cost % Under / Over

Salary (SR) 10,000 ACT1 05-01-15 31-12-86 30 1.99 11,781 - 11,781 5,920 -

Service 1.99 Years ACT2 05-01-15 31-12-76 40 1.99 16,675 - 16,675 8,379 -

DOJ 05-01-15 ACT3 05-01-15 31-12-66 50 1.99 17,970 - 17,970 9,030 -

Sensitivity Analysis 1.99 Year of Service
Discount Rate + 1% ACT1 ACT2 ACT3
Discount Rate - 1% 10,158 14,207 16,382
13,854 19,661 19,735

Salary Rate +1%

13,832 19,629 19,717
Salary Rate -1% 10,144 14,185 16,367
Valuation Date 31-12-16 Employee No. DOJ DOB Age Service Actuarial Liab Accounting Liab Transition Liab Current Srv Cost % Under / Over

Salary (SR) 10,000 ACT1 05-01-12 31-12-86 30 4.99 38,318 16,467 21,851 7,679 -133%

Service 4.99 Years ACT2 05-01-12 31-12-76 40 4.99 45,546 16,467 29,079 9,127 -177%

DOJ 05-01-12 ACT3 05-01-12 31-12-66 50 4.99 47,307 16,467 30,840 9,480 -187%

Sensitivity Analysis 4.99 Year of Service

Discount Rate + 1% ACT1 ACT2 ACT3
Discount Rate - 1% 34,058 39,254 43,264
43,717 53,144 51,796
Salary Rate +1%
43,659 53,064 51,751
Salary Rate -1%
34,021 39,198 43,226
Valuation Date 31-12-16 Employee No. DOJ DOB Age Service Actuarial Liab Accounting Liab Transition Liab Current Srv Cost % Under / Over

Salary (SR) 10,000 ACT1 01-01-07 31-12-86 30 10 100,000 100,000 - 10,000 0%

Service 10 Years ACT2 01-01-07 31-12-76 40 10 100,000 100,000 - 10,000 0%

DOJ 01-01-07 ACT3 01-01-07 31-12-66 50 10 100,000 100,000 - 10,000 0%

Sensitivity Analysis 10 Year of Service

Discount Rate + 1% ACT1 ACT2 ACT3
Discount Rate - 1% 91,142 87,255 91,813
111,157 115,370 109,085
Salary Rate +1% 111,037 115,208 108,993
Salary Rate -1% 91,064 87,141 91,737
Actuarial Valuation Process

Data Requirements
Active employees as at December 31, 2016:
Employee Number
Employee Name
Date of Birth
Date of Appointment
Contract type (limited / unlimited)
Monthly Salary as applicable to the scheme
(separately for last 3 years)
Grade / Designation
Sex (male/female)

Data Requirements
Exits from Active Population (during the last three years;
January 2014 to December 2016)
Employee Number
Employee Name
Date of birth of persons leaving employment
Date of Joining of persons leaving employment
Date of leaving
Mode of exit (Resignation/ Termination/ Death/ Disability)
Last drawn salary on which benefits are based
Benefits paid
Contract type (limited / unlimited)
Data Requirements
Exits from Active Population
Please provide the total number of existing employees and the total
withdrawals occurred over the last three years in the below format:

Particulars 2016 2015 2014

# of employees at the beginning of the period

Employees left due to



Death /Disability


Employees Joined during the year

# of employees at the End of the period

Other Information
Please provide the Salary increase date
54 and the Expected future salary
increase rate.
Data Requirements
Accounts / PreviousValuation:
Rules for calculating EOSB benefits.
Accounts of the company as at 31st December 2015. If accounts are not available
than provide the liability movement under each entity in the below format:

Particulars Amounts in SR
Opening liability

Expense for the year

Benefits paid

Closing liability

COMPANY (figures modified)
Expense for the Next Year
Less than SR 5,000 Less than SR 30,000 Less than SR 150,000

SR 5,000 to 20,000 SR 30,000 to 60,000 150,000 to 200,000

SR 20,000 to 50,000 SR 60,000 to 100,000 200,000 to 250,000

Acc Value SR 52,500 App Value SR 110,000 App Value 275,000

Individual and Corporate Savings Plans
Individual Expectations
Individual Savings Products

Best Values Individual Savings Plan Least Values Individual Savings Plan

Age 40 Age 40
Term 20 Term 20
Contribution 200,000 Contribution 200,000
Mode Annually Mode Annually
Cover Multiple Standard Cover Multiple Standard

Cash Values Cash Values

Membership 6% p.a. Rate of 8 % p.a Rate of 10 % p.a Rate of Cash Value % of Membership 6% p.a. Rate of 8 % p.a Rate of 10 % p.a Rate of Cash Value % of Best to
Year Return Return Return Contributions 8% Year Return Return Return Contributions 8% Least
1 156,013 159,099 162,187 80% 1 81,632 83,305 84,979 42% 191%
2 356,110 366,330 376,676 92% 2 249,897 256,587 263,347 64% 143%
3 564,631 586,469 608,854 98% 3 435,532 451,151 467,113 75% 130%
4 781,951 820,371 860,263 103% 4 633,059 662,016 691,976 83% 124%
5 1,008,469 1,068,959 1,132,593 107% 5 845,123 892,425 941,984 89% 120%
6 1,248,806 1,337,509 1,432,064 111% 6 1,070,322 1,141,593 1,217,225 95% 118%
7 1,499,464 1,623,168 1,756,808 116% 7 1,305,142 1,406,609 1,515,699 100% 116%
8 1,760,995 1,927,200 2,109,202 120% 8 1,556,428 1,695,114 1,846,200 106% 114%
9 2,033,986 2,250,986 2,491,890 125% 9 1,818,774 2,002,472 2,205,295 111% 113%
10 2,319,147 2,596,121 2,907,898 130% 10 2,092,925 2,330,297 2,595,972 117% 112%
15 3,995,636 4,745,237 5,642,768 158% 15 3,735,770 4,411,849 5,212,639 147% 108%
20 6,097,313 7,687,962 9,743,590 192% 20 5,830,936 7,291,936 9,160,792 182% 106%
Employees Education
Part of Employee Benefits Planning services by HR / Finance specialists in
Financial matters of Individuals.
Select Financial Services Providers and make them available after thorough
analysis of products, features, terms being offered by different competitors.
Savings competitors should include Insurers, Mutual Funds, Banks not
simply different insurers.
Life Products can be replaced by high value Mutual funds with life cover on
group basis.
General products may be more cost efficient on group basis.
Savings options within employer based plans may be more efficient then
individual plans.
Help Employees make right choices is a BIG Employee Benefit !!.


Abdul Rahim Abdul Wahab

Actuarial Consultant
Fellow of Society of Actuaries, USA (1995)
Cell# 0092 320 926 27 23