Hi Everyone! Can somebody help me in below question? "Which discount rate could be higher "Pre retirement" or "Post retirement" if Asset Based Discount Rate method is used? and why? Thanks in advance Regards, Rajat
Hi Rajat Pension fund trustees or scheme managers will often be prepared to take more risk in the scheme's investment strategy with assets that back non-pensioners' liabilities pre-retirement than with assets that back pensioners' liabilities. They hope the scheme will be rewarded for taking this investment risk by receiving higher investment returns. So, we may expect the asset returns pre-retirement to be higher than the returns post-retirement and so under the asset based discount rate approach we may expect the pre-retirement discount rate to be higher than the post-retirement discount rate. I hope that helps Gresham
