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Wage replacement rate

Pension-related replacement rate is the figure that reflects the amount of monthly pension payments as a part of the wage on the basis of which pension contributions have been calculated.

This figure allows each member if the pension fund to estimate the amount of future pension payments depending on the retirement scheme, own income and % of pension contributions.

Calculation is performed with a fixed percentage of contributions comprising 5%. Higher percentage proportionally increases the amounts of payments. For examples, when paying 10% contributions the amount of payments will double.

Calculation parameters:

  • Pension contributions – 5% from the wage basis
  • Annual profitability of the Pension Fund – 10%
  • Retirement age– 60 years old
  • Pension type – monthly, fixes-term, continuance – 15 years

Rates of replacing the wage with additional pension depending on life periods in which pension contributions have been paid

Accumulation period (employee’s age)

Wage replacement rate

For the whole period:

In the beginning of payments (1 year)

Average

At the end of payments (15 years)

Wage replacement rates will correspond to the employee’s income on the basis of which pension contributions have been calculated in the corresponding periods.

In order to calculate the amount for several periods one must add up the corresponding figures for the time when pension contributions have been remitted (plan to be remitted).

The Table above vividly demonstrates the advantages of contributions remitted in the early periods of professional life. They form the greater part of accumulated assets. For example, 5-per cent contributions paid only during 5 years from 25 to 30 (first line of the table) will provide for the retirement pension during 15 years in the amount of 37% in the beginning of payments and 142% at the end of payments from the income in that period.

Thus, the younger generation has a significant advantage here, which is the characteristic feature of the early stage of accumulating pension provision.

For more information please call: (044) 230-48-12
E-mail: info@pension-invest.com