Career average earnings pensions - Suggestions on how to enter

Voyant does not currently have a facility designed to model defined benefit arrangements that accrue based on career-averaged earnings because we do not (presently) have the functionality to accrue monetary benefits, year-on-year, (which are then revalued, annually) as happens, of course, within a CARE scheme - in contrast with a 'final salary' scheme, within which one accrues only years of service, as it were, with the actual entitlement to benefits being contingent *entirely* on one's salary at the end.

There are currently two options for modelling these:

1. This option may enable the software to calculate the client's benefits in retirement, as follows: Start by ensuring that the client's employment is 'un-linked' from the 'active' final salary scheme. When this is the case, you will note that a 'Pensionable Salary' field is, or becomes, available in the central part of the Final Salary screen. In this field, one could manually enter a 'pensionable salary' and, against this value, the software will apply the accrual rate, and the years of service. This means that - if the 'pensionable salary' is a plausible estimate of the client's 'average' salary - then the software will be able to arrive at a plausible retirement income, from the scheme. 


2. The alternative - which applies any time that the software is not able to capture all the relevant details of a DB scheme, such as CARE, or one does not have the relevant details, etc.. - is to manually estimate the client's benefits (i.e. arrive at some predetermination of the likely benefits), and enter the resulting value as 'deferred' benefits, rather than 'active' benefits. When entered this way, the software will simply pay the benefits, as specified.


The remaining piece of the jigsaw, is that most CARE schemes  are contributory schemes, and employee contributions entered within Voyant Adviser will *only* be pulled-through, into the cash flow, when the scheme is 'active', and linked to the employment, and not 'deferred' or 'active' and not linked to employment as in 1)  Thankfully, there is a straightforward 'workaround', as follows:

a. Enter the employee contribution as a regular (i.e. basic) expense, taking care to schedule the start and end of the expense, as appropriate. Of course, the expense will need to be entered as a monetary value, i.e. calculate the figure, based on the relevant % of the individual's *current* salary, and one would then set the rate of 'inflation' on this expense, under Advanced Settings > Inflation, to the same rate as is assumed for the individual's salary.

b. Under Advanced Settings > Taxation, note that there is a 'Tax Deductible' option, which should be set to 'Yes', so that the contribution expense is taken from the individual's pre-tax income.