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2010 September Paper 2

O

omurice

Active Member
Hi,

For Question 6 (ii), the answer stated that married employees may want a higher contribution rate since otherwise they will end up with a lower pension than single employees under the new DC scheme.

Understand that a higher contribution rate is required to maintain the 'similar level' of benefits as compared to what they will received under the previous DB scheme, but I don't understand why they will end up with lower pension than single employees (assuming that they make the same contributions with single employees).
 
In a DC scheme, the pension is purchased from the accrued fund.

A pension for a married employee would cost more than for a single employee, for the same amount of pension.

So the married employee needs to accrue more in their pension fund than the single employee, for the same amount of pension. Hence they have to pay higher contributions to achieve that.
 
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