| Summary: | Salary risk and demographic risk have been identified as main risks in analyzing pension expenditure particularly in defined benefit pension plan. Thus, this paper described the development of management flight simulator for pension expenditure (with particular case on a Malaysia Defined Benefit pension plan). Public pension plan in Malaysia is studied to analyze pension expenditure due to salary and demographic risk. Through the literature review and interview session with several officers in public sector, factors affecting pension expenditure are determined. Then, the inter-relationships between these factors are analyzed through causal loop diagram. The System Dynamics model is later developed using iThink software to show how demographic and salary changes affect pension expenditure. Then, by using actual data, the impact of different policy scenarios on pension expenditure is analyzed. It is shown that dynamics simulation model of pension expenditure is useful to evaluate the impact of changes and policy decisions on risk particularly involving demographic and salary risk
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