Some experiments with pensions accrual

Extract

1. In the following experiments I simplify enormously, by assuming that the only benefit provided is a pension on retirement at age 65, that there are no benefits at all on death, not even a return of contributions, and that there are no ill-health retirements or early retirements. I also assume that all salaries, contributions and retirement pensions are paid annually in advance. This simplifies the calculations and hardly affects the results. I also assume complete certainty of inflation. salary increases and investment returns. The purpose of the experiment is to investigate the relationship between the amount of pension that may be deemed to have ‘accrued’ each year, and the amount of contribution (as a percentage of salary) needed to purchase the extra pension that has accrued in each year. under both a final salary defined benefit scheme and a revalued average salary scheme.