Accrual

Discussion in 'SA4' started by barney, Jan 2, 2012.

  1. barney

    barney Member

    can someone remind me please, what exactly is meant by uniform accrual? thanks!
     
    barney, Jan 2, 2012
    #1
  2. bystander

    bystander Member

    Isn't it where the max benefit is 2/3rds and it accrues on an n/ns basis where ns is the max number of years you can fit in and n the actual done?
     
    bystander, Jan 3, 2012
    #2
  3. didster

    didster Member

    Simply put - benefits accrued in first year equals other years.

    My UK specific knowledge is getting a little rusty but I believe there is a requirement to have deferred pensions at least equal to benefits under a uniform accrual rate, eg to avoid employers giving poor benefits to early leavers by say having low accrual in early years and very high accrual in last year(s).

    I didn't think this would lead to reduced benefits because of a 2/3 max where you'd otherwise give higher accrual (flat rate of 2%) but as I said my UK specific knowledge is getting far and few between these days.
     
    Last edited by a moderator: Jan 3, 2012
    didster, Jan 3, 2012
    #3
  4. Gresham Arnold

    Gresham Arnold ActEd Tutor Staff Member

    Didster and Bystander are right. This issue is covered in Section 6.5 of Chapter 7. In summary:

    In a defined benefit scheme, the vested member must be offered a deferred pension, payable from NRA. The amount of the pension must be based on the same formula used to calculate pension for those retiring at NRA.

    The principle of “uniform accrual” must apply such that the leaver is entitled to the same pension he or she expected on retirement at NRA but reduced in the proportion that service completed bears to prospective service to NRA, and based on final salary at leaving.

    ie accrued pension for a leaver = PS/TS x Pension based on FPE at leaving and TS

    where PS = completed pensionable service
    TS = total pensionable service up to NRA
    FPE = final pensionable earnings at leaving.

    This is the same as the pension calculated using the normal retirement formula but using PS and FPE at leaving if the accrual rate is the same for all service.
     
    Gresham Arnold, Jan 17, 2012
    #4

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