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Faculty of Actuaries

Institute of Actuaries

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.
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If the transfer value in respect of the 8 years pensionable service is £68,000, calculate the total transfer value available, assuming that Scheme B is fully funded on a transfer value basis. [2] Describe in what circumstances the value for money underpin is likely to apply.





Discuss the principal factors to take into account in setting the investment strategy for Scheme B, including reference to the value for money underpin. [6] [Total 16]

ST4 A2005




An employer offering a final salary pension scheme is proposing for the first time to allow scheme members to pay additional voluntary contributions (AVCs) in order to enhance their scheme benefits. As actuary to the scheme, you have been asked to advise on the following possible options: Option 1 Contributions are invested in a series of individual money purchase accounts separate from the main scheme assets. Option 2 A regular contribution, expressed as a percentage of pensionable salary and payable until normal pension age, purchases a fixed number of added days of pensionable service. For each of these options: (i) Discuss the advantages and disadvantages from the point of view of the scheme sponsor and the scheme members respectively. Discuss how the AVC payments might be invested.

[8] [3]

(ii) (iii)

Suggest the information which

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