People who avail defined contribution pension systems faces variety of risks. The contribution depends on the contributor’s income and duration of employment. After the contributions are made the rate of accumulation depends on interest rate, dividend payout and movement in asset prices. There are significant chances of fluctuation in the three of them. The average over long periods of time show less variation as compared to year to year changes, the pension that an employee shall be entitled to will depend largely on the timing of contribution and more on the timing of purchase of annuity when one retires.
For households, the tradeoff between current and future consumption results in saving (Sturm, 1983). There are numerous motives leading to the decision of saving. For instance, saving for retirement aims at financing future consumption when income decreases or becomes zero (life-cycle). Also, households save when there is uncertainty about future income (precautionary saving) or when they intend to leave bequests (Sturm, 1983; Gersovitz, 1988). Additional motives include, improvement (increasing consumption) or intertemporal substitution (enjoying interest), investing in business or accumulating down-payment of durables (Browning & Lusardi, 1996; Coleman, 1998; Karlan & Morduch, 2009).
Personal risks is the exposure to financial loss or the additional expenses due to premature death or disability. As a result of death or disability of a person who earns income, financial lost may be incurred leaving a family or a business financially insecure. Next, property risks is the uncertainties of direct or indirect losses to personal or real property due to fire, theft, accident or any other hazards while liability risk involves the possible losses as a consequences of carelessness or property damage to others. For the speculative risks, it is a category of risks that might give a result either profit or loss. All speculative risks is undertaken as a result of a conscious choice.
Introduction Human beings are exposed to various kind of risks in their daily lives and activities. Earning capacity may be ended abruptly due to death, old age, sickness or accident that may result in disability. Therefore, we need an insurance to solve this problem. Insurance can be defined as an economic institution based on the principal of mutuality, form for a purpose of establishing a common fund, the need for which arise from chance occurrences of nature, whose probability can be estimated. When you buy an insurance policy, you are transferring the risk of a potential financial loss to the insurance company in exchange for a fee.
If the tabarru’ amount is less than the sum of claims then the Risk Fund will be deficit, otherwise the tabarru’ amount exceed the claim then the Risk Fund will have a surplus. The wakala model is the default standard for takaful. Operators charge and carry out takaful operations. For takaful operators, he makes a profit if wakala fee exceed expenses. The surplus is actually the excess premium paid by the participants, so the surplus refund can be explained as a experience refund.
Pooling and diversification is a fundamental characteristic of pension funds. The meaning of a pension fund is further explained by the Organisation for Economic Cooperation and Development (OECD) (2005) as, “The pool of assets forming an independent legal entity that are bought with the contributions to a pension plan for the exclusive purpose of financing pension plan benefits. The plan/fund members have a legal or beneficial right or some other contractual claim against the assets of the pension fund.” Jefferis and Tabengwa (1999) also view a pension fund as a form of contractual savings, in that they involve a contract to save regularly which is in most cases monthly, over a relatively long period of time. In the meantime, the accumulated contributions are invested in order to generate further returns that supplement the value of the fund and hence boost the value of the future pension that can be paid out. A pension is then defined by Princeton University online dictionary, (cited in Chowa et al., 2014), as a post retirement benefit that is received by an employee from his/her employer’s retirement plan whose main aim is to provide a regular source of subsistence to the non-working
CHAPTER 1 INTRODUCTION INSURANCE Insurance means equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a risk management form primarily used to hedge against the risk of uncertain loss. An insurer is selling the insurance; the insured is the person buying the insurance policy. The money to be charged for a certain amount of insurance coverage is called the premium. The insured receives a contract which is called the insurance policy, it details with the conditions and circumstances under which the insured will be financially compensated.
They have their means of setting a certain amount used per year so that citizens can use their medisave the follow year and thereafter. This ensures medisave savings are conserved for medical needs in the future not forgetting for usage during old age. (Medisave) In general, the government sees that it should be sufficient especially when it comes to citizens being hospitalized provided if the citizen chooses to stay in standard wards of 5-6 beds or standard wards of 6-8 beds. The limitations allow citizens to plan for their medical needs be it near future or concurrent medical needs. Citizens will be alert and do proper planning financially and schedule for appropriate medical consultations or screenings.
WHY SHOULD WE TAKE INSURANCE? Insurance is desired to safeguard oneself and one’s life against possible losses on account of risk and perils. It provides financial compensation for the losses suffered due to happening of any unforeseen events. By taking life firstly a person can have peace of mind need not worry about the financial consequences in case of any ultimately death. Many more attractive features make life insurance necessary for every responsible citizen of the country such as: • Superior to an ordinary saving plan as to provide full protection against risk of death.
The Court may make a maintenance order, which it deems just for any period including up until the death or re-marriage of the party in whose favour the order is given, whichever occurs first. Rehabilitative maintenance is awarded to a divorcing woman, for a limited period, while she trains or re-trains for a job or profession. It is unlikely that maintenance will be awarded to an ex-wife who can support herself. In making an order the Court will primarily weigh the need of the person to be supported against the resources of the person who is called upon to provide the maintenance. These resources may include the person’s Pension Fund