Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Pension
Pension basic
Replacement ratio and salary scale
1
...

2
...

3
...
Defined benefit (DB): which pays a monthly amount to retirees determined by formula
...

Annual pension benefit =final average (or career average salary) x accrual rate x number of
years of service
2
...
The fund grows with interest and is distributed to the employee at retirement
...
The amount in the fund at
retirement is not known in advance and depends on investment performance
...

4
...

5
...
The rate of salary function is defined so that if the annual
salary rate at age x is S(x) and the annual salary rate at age y is S(y)
...
A rate of salary

function of the form 𝑠𝑥 = 𝑐 𝑥 , representing a salary rate that increases continuously
...
K-year final average salary: the average of the salaries earned in the last k years before retirement
...
Salary scale: 𝑠𝑥 is defined an index of the salary earned during the year of age (x,x+1], so that if S(x)
is the salary earned between age x and (x+1) and S(y) is the salary earned between age y and (y+1),
then

𝑆(𝑦)
𝑆(𝑥)

=

𝑠𝑦
𝑠𝑥


...
To go from a rate of salary function to the corresponding salary scale, we need to integrate the rate
of salary function over one year
...
5
Actuarial present value of benefits
1
...
𝑛: the number of years of service
3
...

4
...

5
...

6
...
COLA: cost of living adjustments (in Britain)

---