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Assignment X2 Q2.8 (iii)

S

Snowy

Member
Solution to (iii)
Pricing problems of "flexing" benefit schemes.
"But for a 50 and 25-year old doing the same job, would it be seen as "fair" that the 50-year old purchased more holiday for the same reduction in pension accrual as the 25-year old? Care would be taken with an age discrimination legislation."

Can someone please explain this.
 
All other things being equal, the cost of providing a pension of a 60th of final pensionable salary (FPS) for a 50-year old is higher than providing a pension of a 60th of FPS to a 25-year old. (The cost of accrual increases with age.)

However, the cost of a day of holiday does not vary with the age of an employee.

So, in theory, if a 50-yr old gave up the right to accrue pension and bought extra holiday with the proceeds, they could get more holiday than if a 25-yr old gave up their right to buy pension.

Employees may think this was unfair. It may be considered to be discriminatory under age discrimination legislation.
 
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