In a final average pension plan, what is typically used to calculate the pension?

In a final average pension plan, the calculation of pension benefits typically involves taking the average of the best five consecutive years of earnings. This approach allows for a more representative and equitable calculation of benefits, as it mitigates the impact of any unusually low earnings years on the pension amount. By averaging the best years, this method ensures that the pension reflects the employee’s top earning periods, which is especially beneficial for those nearing retirement who may see fluctuations in salary due to various factors such as job changes or economic conditions.

The focus on consecutive years emphasizes the plan's intent to reward consistent high performance over time rather than isolating individual high-earning years that may not represent an employee’s overall career earnings. This structure can provide a fairer retirement income to employees, as it takes into account not just a snapshot of their final year or a fixed income amount, but rather a more balanced view of their career earnings.

Other options do not align with the typical practice of calculating pensions within a final average pension plan, as they either focus on insufficient data points or irrelevant factors.