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DC scheme

S

Snowy

Member
For DC schemes, why does the cost of accrual increase with age if investment returns are greater than earnings inflation?
 
The term "cost of accrual" is generally used in the context of final salary or other defined benefit schemes, rather than DC schemes. Eg the cost of providing a pension of 1/60th of final pensionable salary.

The cost of providing a 60th of final pensionable salary increases with age because, the older a member is, the shorter the period to retirement - so the less time there is for contributions to earn investment returns before they are paid out as pension.
 
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