In relation to a defined contribution (DC) employer pension scheme, 'dynamisation' refers to which?

• A. The indexing in line with inflation of past remuneration, in order to calculate final remuneration
• B. A guaranteed minimum investment return to normal retirement age
• C. Opting to transfer part of a member's fund at retirement to an ARF
• D. The provision of actively managed funds as a default investment strategy

Answer: (A)

Dynamisation is about uprating the earnings base used in benefit calculations by inflation. In practice, it means adjusting past remuneration upward in line with price or pay growth so that the figure used to determine retirement outcomes reflects changes in purchasing power over time. In a DC scheme context, this concept influences how the reference earnings are treated when calculating the eventual retirement income or related values, even though the actual benefit in a DC plan ultimately depends on the fund value at retirement.

So the choice describes inflating past remuneration to mirror inflation in order to calculate the final remuneration, which is why it’s the best fit. The other options describe different concepts—guaranteed investment returns, transferring to an ARF, or having actively managed funds as the default—none of which capture the idea of inflation-based uprating of earnings used in benefit calculations.