Hi In the mentioned question of April 2018 Paper 1,I am unable to understand what the question is asking for. As per my understanding,the employer has transferred all risks to the insurance company and will pay a premium to the insurance company for the same. Then the insurance company would have to finance for this liability and not the employer.So what is exactly meant by the "insurance co offering the employer the ability to pay for future benefits using the various financing methods"?
You are right in the sense that the employer will pay a premium to the insurance company, hereby transferring all the risks to the insurance company. The preamble is saying that the insurance company has offered flexibility to the employer to pay this premium and this can be in one of the forms below: PAYG: which means as and when pension will be due to pay to the employees then a premium will be paid to the insurance company. Funding in advance: whereby a payment upfront will be paid to the insurance company when transferring the risks. Regular premiums: Similar to above except that instead of a single upfront premium, a series of the premium will be paid to the insurance company. Hope this helps.
