An accrual rate is the share of pensionable salary a defined-benefit pension credits for each year a worker remains in the plan.
The core formula
In a simple final-salary defined benefit plan:
$$ \text{Annual pension at retirement} = (\text{years of service}) \times (\text{accrual rate}) \times (\text{pensionable salary}) $$
If the accrual rate is (1/60) and a worker completes 30 years, the worker earns (30/60 = 1/2) of pensionable salary as the annual pension before later adjustments.
What changes generosity
The accrual rate is only one lever. Total generosity also depends on:
- whether pensionable salary is final salary or career average pay,
- early or late retirement adjustments,
- inflation indexation after retirement,
- survivor benefits and other guarantees,
- employee contributions.
Why economists care
Accrual rates affect retirement timing, deferred compensation, and the long-run liabilities of firms and governments. A higher rate helps recruit and retain workers, but it also raises the present value of pension promises.