In this question, a defined benefit pension scheme has accrual rate 60ths and asks for distinct potential changes to reduce costs in the scheme. The acted revision booklet says reducing the accrual rate to 80ths will reduce costs by 25%, but I can’t understand why? If you reduce the accrual rate from1/60 to 1/80, you’re awarding 1/3 less of benefits surely? An explanation would be v appreciated !
I remember my 'A' Level Business Studies teacher (!) teaching me that a percentage change is worked out = change / original so change = 1/80 - 1/60 original = 1/60 change / original = 1/80 - 1/60 / 1/60 = -.25
