Transitioning from Defined Benefit to Accumulation Scheme: Implications for Defense Force Retirement Benefit Fund in PNG

Abstract: The Defense Force Retirement Benefit Fund (DFRBF) in Papua New Guinea (PNG) traditionally provided pensions based on service length. Members over 20 years receive a lump sum equal to 50% of their benefits, those aged 8 to 20 years receive a gratuity, and members of less than 8 years receive a one-time payment. In 2016, following updates to the DFRB Act in 2015, DFRBF transitioned to a new accumulation (defined contribution) scheme for new members. This change aligns with global retirement trends and aims to enhance financial stability and give members more control over their savings. About 95% of active members chose to transfer to the new scheme, requiring them to contribute 6% of their salary, while employers contribute 8.4%. This study explores the effects of this change, including its impact on members and the fund. It compares it to similar updates in other countries to help policymakers and fund managers improve retirement benefit schemes. Keywords: Accumulation, Contributions, Defined Benefit, Pension Scheme JEL Classification Number: F31, F41