Decrement Improvement Scales
Slope supports both Standard and Generational Improvement Scales. These are found within the Assumption Management module under Decrement Tables.
Generational Improvement Scales
Generational mortality improvement is widely used in valuation of retirement benefits. Since 2014, the Retirement Plan Experience Committee (RPEC) of the Society of Actuaries (SOA) has annually released generational improvement scales for use with mortality tables. The improvement scales are gender specific and 2-dimensional with improvements rates based on both age and calendar year (shown below).
The Slope Pension library comes with the 8 standard mortality improvement scales released by the SOA: MP2014, MP2015, MP2016, MP2017, MP2018, MP2019, MP2020, and MP2021.
In Slope, any Mortality table where generational mortality improvement is to be used must have a base year assigned to the Mortality table. For instance, PUB-2010 tables should have a base year of 2010. Mortality rates for any age during the base year are not adjusted for mortality improvement.
Mortality rates for years after the base year are calculated by applying the cumulative improvement for all years between the base year of the table and the measurement period for the given age. That is, to develop the mortality rate for a 40 year old during 2013 using a mortality table with a base year of 2010
q40:2013 = q40:2010 x [(1 – improvement rate40:2011) (1 – improvement rate40:2012) (1 – improvement rate40:2013)]
Mortality rates for years before the base year are calculated by removing the cumulative improvement for all years between the base year of the table and the measurement period for the given age. That is, to develop the mortality rate for a 40 year old in 2007 using a mortality table with a base year of 2010
q40:2007 = q40:2010 / [(1 – improvement rate40:2010) (1 – improvement rate40:2009) (1 – improvement rate40:2008)]
The earliest year for mortality improvement rates in the standard scales available in the Slope Pension library is 1951. The SOA has released guidance directing broad discretion as to how to adjust mortality rates prior to the first year of a generational mortality improvement scale (see the RPEC report accompanying the release of the MP2014 scale). SLOPE will hold mortality rates level (improvement of 0) for any periods prior to the first year of a generational mortality improvement scale.
Standard Improvement Scales
Standard Improvement Scales allow for an improvement rate to be applied based on Gender and Age. Standard Improvement is calculated as follows:
Qx * (1-Improve. Rt) ^ (Current Year based on current projection time- Improvement Start Year)
How to Import or Create a new Improvement Scale:
- Navigate to Assumption Management > Decrement Tables and click the ‘Import from Excel’ button.
- Provide a name for your improvement scale and select ‘Standard Improvement Scale’ or ‘Generational Improvement Scale’ in the Type drop down.
- In the file drop down, you may select a file from your file manager or click ‘Add New File’ to upload a new excel or delimited file.
- If you are uploading a new file, first select which folder in your file manager you would like to upload your file to and then select the file you are uploading.
- In the Excel Sheet Name field, select the worksheet that contains the improvement scale you wish to import.
- Upon clicking Import, you will navigate to the Improvement Scale details screen where you can verify the data, make changes and click save.
If you wish to create a Standard or Generational Improvement Scale in SLOPE, you will use the create button. When creating a Generational Improvement Scale in the application, you will need to specify the range of years you will provide an improvement rate for by entering a First and Ultimate Calendar Year.
How to apply an Improvement Scale to your Mortality Assumptions
To configure a model to utilize a Standard or Generational Improvement Scale that has already been created, you will begin with a nested mortality table. More information on Nested Tables is available here.
- In Model Development > Create a Table Structure which contains your desired Index Columns which will be read to determine which Mortality Table and Improvement Scale should be applied. You will also need to add a ‘Decrement Table’ data type column to your Table Structure. . If you are utilizing a model created from the Slope Library or already have a Mortality Lookup Table, you will not need to complete this step.
- Using “View/Edit Data Tables” in the top left, you can navigate to the assumption management module to create your Mortality Lookup table.
- Select your desired Decrement Tables and Improvement Scales for each row in your Mortality Lookup Table and click 'Save Changes'.
Note: To apply an improvement scale to a decrement table, you must have an improvement base year set on your decrement table. This can be edited under Assumption Management > Decrement Tables > Select desired table > Edit Details (top right corner shown below)