In the example given in CFAI book 2 pp120, the projected annual pension is 3% times final salary times number of years of service. But where does this 3% come from? Is it the same as rate of compensation increase? Or is it another number that is not defined as a term in the text?
Its said that “The plan will pay Smith, after she retires, an annual pension equals to 3 percent of her final salary per year of service completed”
oic. Thanks for pointing that out. So I guess that 3% is another parameter.
What about the pension length? Does real companies pay until you die or is it fixed like 20 years in this example?