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April 2005 Q4 (iii)

S

Snowy

Member
1) Why would the value for money underpin bite if: TV-in basis strong or TV-out basis weak compared to the 6%pa roll-up?

2) And also, if the TV basis has weakened during the transfer dates?
 
Hi Snowy.

I see noone has responded to your query so I've given my answer below...it's not a great response but it's better than nothing! I think it's easier to understand the TV-out basis being weak...

A strong basis is a conservative basis i.e. it results in a high value of liabilities.

A strong TV-in basis means that when the £20,500 was transferred in, a strong basis was used to calculate the service credit of 3 years 2 months.

So £20,500 is a high liability value to put on a service credit of 3 years 2 months i.e. 3 years 2 months isn't a very generous service credit to give for £20,500.

So because Scheme B was kinda mean in the service credit, it's quite likely the underpin will bite.

A weak TV-out basis means a basis that gives a low liability value.
So a weak TV-out basis will put a low value on the 3 years 2 months.
Hence it becomes likely that the 6% roll-up will be bigger than the TV-out.
 
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