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in BUS 4027W - Actuarial Risk Management by

If salary increases are expected to be higher than previously assumed, why would the past service liability be higher?

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by (460 points)

The past service liability is the past service (thus the number of years that the life has already worked for the company), multiplied by the average pensionable salary at retirement age. 

Thus an increase in the expected salary increases would lead to an increase in the expected average pensionable salary at retirement age, which would lead to an increase in the past service liability. 

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