When appropriate, the social security institution and actuary should use microsimulation models to support the design and valuation of social security schemes.
The microsimulation models are different from the valuation model. The social security scheme is valued using a valuation model, while the microsimulation models are there to support and analyze specific items of the social security scheme and can be forward looking or backward looking.
Microsimulations are commonly used to understand the impact of changes to the social security programme on various subgroups of the population and to calibrate valuation models. This guideline should be read in conjunction with Guideline 2 (Data), Guideline 3 (Assumptions), Guideline 4 (Valuation methodology), Guideline 5 (Valuation model) and Guideline 49 (Implications of changes and reforms in benefits and financing) of these Guidelines.