Calculations for USS pensions This is a fork Gib's pension model in which I'm going to add an adjustment for inflation on the DB pension accrual.
- I'll calculate average inflation in the UK 1947-2015 using ONS data and a 0.7pp conversion between RPI and CPI.
- Estimate mean and SD of inflation to get distribution
- Create two distributions of inflation, a) a randomly drawn distribution of inflation, and b) historical inflation randomly reordered for future inflation.
- Adjust the uprating of DB benefits by inflation each year. Current code uses incr variable to increment by 1 each year. This allows for DB benefits to increase in line with inflation. This is not techincally correct as the USS only increases up to 5% and then 50% of increases above 5% to 15%, giving a max increase of 10%.
Theoretically we could use Bank of England forecasts of expected future inflation. But I think the SD of this will be way too low. So I won't consider it further.
Potentially will add an option to allow people to set their own inflation assumptions.