Generic earnings-related schemes are of three different types governed by different rules of benefit calculation. Defined benefit (DB) schemes typically specify an accrual rate, expressed as a percentage of individual pensionable earnings, at which benefit entitlements build up for each year of coverage. The higher the contribution rate the higher the accrual rate that can be sustained. Defined benefit schemes can be funded or pay-as-you-go or a combination of both over their lifetime. In points schemes, the pension benefit is equal to the number of points accumulated during the career multiplied by the point value. Defined contribution (DC) schemes are individual account-based schemes that accumulate contributions during the working career to finance retirement. When the accounts accumulate capital in the form of financial assets, these schemes are classified as funded defined contribution (FDC) while if schemes are based on notional accumulated capital, then they are referred to as notional defined contribution (NDC) schemes. In both cases for the modelling of a replacement rate in Chapter 2 an annuity divisor is applied to transform financial assets (real or notional) into monthly pensions. Table 1.3 presents future parameters and rules for benefit calculation that will apply to people who enter the labour market in 2022, according to the latest legislation.

Within PAYG DB schemes, accrual rates of at least 2% apply in Pakistan, the Philippines and Viet Nam. China and Indonesia credit the lowest rates of 1.0%. In Thailand the accrual rate varies by career length. In Viet Nam it varies by gender. In some economies, total accrual rates are limited by an earnings ceiling or by a maximum number of years that generate accruals.

Pensionable earnings measures used to calculate benefits differ across economies. Only China, Indonesia and Viet Nam use the entire career earnings with Pakistan using the final year of earnings and India, the Philippines and Thailand using the final five years.

All schemes apply a valorisation rate to past earnings to take account of changes in “living standards” between the time pension rights accrued and the time they are claimed. The most used rate among Asian economies is price inflation with China being the exception using wage growth. Also, the Philippines has no valorisation rule.

For DC plans the cumulative growth of the contributions is determined by the rates of return. It is based on financial market returns in FDC schemes and on notional interest rates in NDC schemes. One key parameter for DC plans is the contribution rate paid into individual accounts.

All Asian economies except Malaysia and Sri Lanka set a limit on the earnings used to calculate pension benefits. The highest ceiling applies in the DB scheme in Viet Nam at over 8 times average earnings. The lowest at 0.54 and 0.92 times are in Pakistan and Thailand respectively.

Indexation refers to the growth of pensions in payment, i.e. during retirement. Price indexation is most common. China is the exception with no set indexation rule and so it is classified as discretionary.

The effective accrual rate measures the rate at which benefit entitlements are effectively built for each year of coverage. It thus depends on modelling assumptions and is closely connected to the replacement rates shown in Chapter 2. For DB schemes, it equals the nominal accrual rate after adjusting for all the elements that apply to pensionable earnings i.e. thresholds, valorisation of past earnings, sustainability factors. In FDC and NDC schemes the effective accrual rate is the replacement rate, which depends on contribution rates, rates of return and annuity factors, divided by the number of years of contribution.

Based on current legislation, at the average‑wage level, the highest future effective annual accrual rate of 1.9% is in the Philippines. The lowest rates, below 0.5%, are in the FDC schemes in Hong Kong (China) and India.