Ch15 page 39

How come the SCR under the PU method > CU method if members have little or no past service?

 

CU rate has 2 components:

• 1 yr accrual part, which is like the PU except it doesn't have salary increases to date leaving (so it is smaller than PU)
• Revaluation component, to increase past service liability in line with salary increases.

If little to no past service, latter is small so CU is overall smaller.