The result (e.g. insurance period, newly awarded pension) is achieved by averaging across all life paths.
Some extreme situations can be addressed by establishing a new status, but that makes the model more complex and again, the calculation is only approximate.
With proper availability of data, it is possible to use the whole structure for selected parameters (primarily insurance period), but it is both calculation- and memory-consuming.
On the other hand, the advantage of the deterministic approach is the fact that it is easier to ensure consistency with external outputs, e.g. population projection and macroeconomic scenario of average-wage growth.
For example, to ensure consistency with an external macroeconomic projection, it is necessary to calibrate salary growth over the career.
The main benefit of the stochastic approach is the possibility of exact modelling of all non-linear elements in the pension formula.
The results thus include even extreme lines and it is possible to explore cases of individuals threatened by poverty.
Strengths Weaknesses There are a number of dynamic microsimulation models in various countries: For more see e.g. (Asghar Zaidi and Katherine Rake, 2001).