[an error occurred while processing this directive]

[an error occurred while processing this directive] 3.7 Costing and Investment Base of Occupational Schemes A group pension scheme represents a significant commitment for an employer and the cost implications must be carefully planned. Costing assumptions will need to be made relating to:- Salary increases. Investment performance. Annuity rates. Early leavers. Changes in scheme membership. Deaths. Future legislation. Each assumption is important, but should not be viewed in isolation. It is the effect of the package of assumptions that is important. Some of the assumptions are inter-related too. For example, high levels of salary increase alone would increase costs substantially, but may be accompanied by high investment returns and high interest rates, which means relatively high annuity rates. These accompanying factors would tend to reduce costs. Conversely, low inflation, low investment returns and low maturity rates increase costs. These assumptions will be reviewed regularly by the scheme actuary, generally every three years. Use of assumptions enable pensions to be funded in advance, and there are a number of ways of approaching this:- Controlled funding, which enables an 'average' cost to be charged for each scheme member, rather than the actual cost for accumulating that member's projected benefit. In general, this reduces the costs for the employer. It is only appropriate for group occupational schemes, rather than individual account schemes like Executive Pension Plans and Additional Voluntary Contributions. Deposit Administration, where contributions are invested to produce a yield rather like a deposit account, and possibly bonuses similar to a with profits contract. Deferred annuity basis, either guaranteed or with profits, providing a guaranteed amount of future pension or a fixed contribution over the period

[an error occurred while processing this directive]