How does the pension accrual work in practice?
We are pleased to give you an example. It helps if you are familiar with the following concepts.
The pension base is the basis for each pension calculation. The pension base is the middle sum of your most recent two annual salaries minus the offset in the year of your retirement.
The offset is the part of your salary over which you do not accrue pension as allowance is made for the AOV, which you will receive from the government. The offset in in 2018 is Afl. 18,000.
Each year, you accrue 2% pension over the pension base. This 2% is the accrual percentage.
The total that you accrue during your number of service years with the government is your pension.
The pension accrual of Frank
Frank works with the government. When he will retire at the age of 62, he will have 35 service years. His annual salary is Afl. 40,000. How much pension will Frank receive when he retires?
|Annual salary in two most recent years:||Afl. 40,000|
|Minus: offset||Afl. 18,000|
|Pension base:||Afl. 22,000|
|Annual pension accrual: 2% x Afl. 22,000 =||Afl. 440|
|Pension per year: 35 service years x Afl. 440 =||Afl. 15,400|
In addition to this amount, Frank will also receive his AOV. This is a simplified calculation to show the principle of the pension accrual. In reality, Frank’s salary will not be the same throughout his career. His accrued pension is also adjusted annually to the inflation via a cost of living allowance.
The above accrual applies to the current pension plan of APS. There are other arrangements for employees who have worked with the government for a long time. If you have questions about these older arrangements, the employees of the service desk will be please to answer these.