Chapter 18 states that a reduction in the difference btwn i-e by 1% is expected to increase the active liabilities by 1% for each year of average future membership. It also states that a reduction in the difference btwn i-pinc by 1% is expected to increase the liabilities by bwtn 10%-15%. What happens if the plan has both e and pinc and the difference of both in relation to i reduce by 1%? Is the above effect additive? Thanks for your help
Yes. Strictly speaking it's compounded eg 1.01^20 *1.15 -1 for 20 years future working life and 1 % change to both i-e and i-p. But I suppose simple addition works close enough as well. To see why take a look at the formula for PV of a pension
