Which statement correctly portrays the effect of adjustments on pension income calculations?

The statement that employee OPC (other personnel contributions) must be added to net income accurately reflects the treatment of pension income for taxation purposes. Pension income calculations often include adjustments for various components that contribute to the final income figure. Employee contributions to pension schemes are generally relevant because they can affect the amount of taxable income that is ultimately reported.

When pension benefit calculations are made, employee contributions represent a portion of the earnings that often need to be added back to net income to arrive at the proper taxable total. This is because these contributions may have been made with pre-tax income, and including them in the taxable income is essential to correctly determine what should be included for tax purposes.

On the other hand, net income without these contributions might not provide an accurate picture of the individual's taxable pension income, as it could significantly underestimate the taxable amount. Hence, adding employee contributions provides clarity and transparency in tax calculations, ensuring compliance with taxation laws and regulations.

The other alternatives do not accurately describe the proper treatment of pension income. For instance, saying only net income is considered neglects the importance of specific contributions like employee OPC. Ignoring employer contributions entirely fails to recognize their potential impact on pension benefits and taxes. Claiming pension income is increased by tax-free allowances misrepresents