(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
Where scheme rules give members the right to post-retirement
increases, the actuary must make assumptions about the rate of
increase. Much depends upon the benefits promised under the scheme.
If the rules give a fixed percentage increase, for example 3% per
annum compound, then that is the rate to be used for funding
purposes. But where the rules contain powers of augmentation which
the trustees regularly exercise to increase pensions in payment, or
pensions increase in line with the Index of Retail Prices, the
actuary must estimate the likely level of future increases (see
PSI7.1.4).
