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Should Defined Benefit Pension Schemes be Career Average or Final Salary?

Abstract: There is widespread dissatisfaction amongst employers with defined benefit pension schemes, and many are switching to defined contribution schemes. Career average is a form of defined benefit scheme that has some important advantages over final salary schemes. The comparison of career average and final salary schemes is a neglected area, and this paper offers one of the first in-depth analyses of this topic. It considers the advantages and disadvantages of a cost neutral switch to a career average re-valued earnings (CARE) scheme.

Published on 5th September 2011
Authors Charles Sutcliffe
Series Reference 2007-06