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Salary Scale- Pensions

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asked Oct 17, 2017 in BUS 3024S - Contingencies by anonymous

If a member is aged 35 exactly at valuation date and received R75 000 in salary in the year to the valuation date. When calculating final average salary at retirement age 65, the answer is given below:


$$75000 \frac{s_{62}+s_{63}+s_{64}}{3s_{34}}$$


Why do we divide by $$s_{34}$$ and not $$s_{35}$$

1 Answer

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answered Oct 19, 2017 by Yaseen (650 points)

You say that the member "received R75 000 in salary in the year to the valuation date" and that the member was aged 35 at the valuation date. 

Furthermore, the salary received by the member in any year is set at the beginning of the year so the calculation of this salary will consider the salary scale at the beginning of that year.

In this case, the relevant value for the calculation of the salary, in respect of the R75 000, is at age 34 exact as this salary is received from age 34 exact to age 35 exact.

34
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