The operational characteristics of a target benefit plan with fixed annual contributions and variable benefit accruals based on an aggregate funding requirement are studied both analytically and by simulation under the assumption of a constant valuation rate and log-normal returns. The distribution of the pension entitlement at retirement is compared under three different parameter sets for asset returns. The performance of the target benefit plan is then compared to a DC benchmark, both in terms of the proximity of the retirement benefits to the targeted benefit level and in terms of intergenerational equity. Finally, two practical modifications to the benefit policy are considered and their effect on performance is assessed.
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