Planit:UK Defined Benefit Pension Plans Exercise

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This case study is specific to financial planning in the United Kingdom, so has fixed values rather than indices by country. For a similar case study applicable to other countries, please see Planit:Calculating and Entering Defined Benefit Pension Plans Exercise, Planit:Malaysian Civil Servant Pension Exercise or Planit:Entering Other Revenues Exercise.

Solve for the following problem:

Miss Mary Joe is a 40-year old secretary, who will receive a Defined Benefit Pension Plan upon retirement. She has been working there for 10 years, currently earning £25,000 annually, and plans to retire in another 25 years.

Her assumed inflation is 3.0%, and she plans to take out the maximum possible lump sum on retirement to fund some travel goals. There is a straight 1/60th accrual rate and a 12:1 commutation factor. What is the value of Mary Joe’s maximum lump sum and reduced pension benefit?


Solve for the following problem:

Sally Barber, currently age 56, expects to receive a pension when she retires at age 61. Sally has been working at her place of business for 29 years and wants to have the full amount of her annual benefit, not reduced by a lump sum. Her inflation assumption is 3%, and the accrual rate is 1/60. Input this data into the Pensions and Other Revenues screen for the client. What did you enter for the following data entry fields?

  • Amount Per Year: £ ____________
  • From Year: _________
  • To Year: __________
  • Percent Taxable: _______%
  • Amount on Death: _______%
  • Model As: ______________________

Check the accuracy of your client against the answer key

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