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DB scheme design- specifics (termination of employment (before retirement)…
DB scheme design- specifics
eligibility
entry conditions on the basis of
age
length of service
type of work
number of hours worked
legal and commercial restrictions regarding discrimination
aims
reduce cost of benefit provision
reduce admin costs
protect the scheme against selection
direct resources to specific members
Retirement benefits
level of benefits
accrual rate
pensionable service
pensionable earnings
final pensionable earnings
retirement age
the lower the age...
higher cost for sponsor
lower benefit to the beneficiary
band of ages
Death benefits
lump sum
balance of payments over a guarantee period
popular DIS benefit
can vary by employment class
dependants' pension can also be provided
dependant's pension
% of the member's pension
ill-health
as for death benefits, the main aim is protection
termination of employment (before retirement)
differences between voluntary and forced termination
differences between vested and non-vested leavers
vested- deferred benefits payable at retirement
non vested- refund of contributions
Deferred benefits may increase in line with inflation
transfer value to another scheme
Benefit increases
fixed
inflation index
discretionary
combination
Integration with the State
Many schemes design their benefits with a total target inclusive of State provision.
Integration can be explicit or implicit, accurate or approximate
Presentation
Communication is vital to ensure proper appreciation by members
legislative effects
restrictions on benefit design e.g.
min retirement age
max retirement age
limit on amount of contributions
limit on benefits and benefit increases