Bvcvv
Faculty of Actuaries
Institute of Actuaries
EXAMINATION
11 April 2005 (pm)
Subject ST4 Pensions and other Benefits Specialist Technical
Time allowed: Three hours INSTRUCTIONS TO THE CANDIDATE 1. Enter all the candidate and examination details as requested on the front of your answer booklet. You have 15 minutes at the start of the examination in which to read the questions. You are strongly encouraged to use this time for reading only, but notes may be made. You then have three hours to complete the paper. You must not start writing your answers in the booklet until instructed to do so by the supervisor. Mark allocations are shown in brackets. Attempt all 6 questions, beginning your answer to each question on a separate sheet. Candidates should show calculations where this is appropriate.
2.
3.
4. 5. 6.
AT THE END OF THE EXAMINATION Hand in BOTH your answer booklet, with any additional sheets firmly attached, and this question paper. In addition to this paper you should have available the 2002 edition of the Formulae and Tables and your own electronic calculator.
ST4 A2005
Faculty of Actuaries Institute of Actuaries
1
The finance director of a very large company operating a defined benefit pension scheme is concerned with the increasing level of premium being paid to insure the death in service benefits provided by the scheme. These benefits are currently: A lump sum of five times the member s basic salary. A non-increasing spouse s pension equal to 75% of the member s prospective pension. (i) Set out the points you, as actuarial adviser to the company, would include in a letter to the finance director explaining why the premiums may have increased. [3] Suggest possible ways these premiums could be reduced. [4] [Total 7]
(ii)
2
You are the actuary to a large defined benefit pension scheme. The trustees are reviewing the scheme s investments and are proposing to switch a large proportion of the assets from equities to
Institute of Actuaries
EXAMINATION
11 April 2005 (pm)
Subject ST4 Pensions and other Benefits Specialist Technical
Time allowed: Three hours INSTRUCTIONS TO THE CANDIDATE 1. Enter all the candidate and examination details as requested on the front of your answer booklet. You have 15 minutes at the start of the examination in which to read the questions. You are strongly encouraged to use this time for reading only, but notes may be made. You then have three hours to complete the paper. You must not start writing your answers in the booklet until instructed to do so by the supervisor. Mark allocations are shown in brackets. Attempt all 6 questions, beginning your answer to each question on a separate sheet. Candidates should show calculations where this is appropriate.
2.
3.
4. 5. 6.
AT THE END OF THE EXAMINATION Hand in BOTH your answer booklet, with any additional sheets firmly attached, and this question paper. In addition to this paper you should have available the 2002 edition of the Formulae and Tables and your own electronic calculator.
ST4 A2005
Faculty of Actuaries Institute of Actuaries
1
The finance director of a very large company operating a defined benefit pension scheme is concerned with the increasing level of premium being paid to insure the death in service benefits provided by the scheme. These benefits are currently: A lump sum of five times the member s basic salary. A non-increasing spouse s pension equal to 75% of the member s prospective pension. (i) Set out the points you, as actuarial adviser to the company, would include in a letter to the finance director explaining why the premiums may have increased. [3] Suggest possible ways these premiums could be reduced. [4] [Total 7]
(ii)
2
You are the actuary to a large defined benefit pension scheme. The trustees are reviewing the scheme s investments and are proposing to switch a large proportion of the assets from equities to