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Chapter 3

N

NikitaMBM

Member
In CA1 Chapter 3: External environment
On page 16: Economically, older people are more likely to be saving money and less likely to be spending it.
On page 18: Older members of the population are likely to reduce the amount they save and once they retire from employment start spending the funds they have saved.

It maybe that I've missed out on the context in which these statements have been made, but aren't these statements contradictory?
I am confused. Please help. Thanks!
 
Also in the same chapter, if one sees the solution of the core reading example, there is a term mentioned non-contractual termination. Can someone please tell me what does this mean?
(The statement I am referring to is "tax policy proceeds only in the event of non-contractual termination", on page 21)
Thanks so much! :)
 
NikitaMBM said:
In CA1 Chapter 3: External environment
On page 16: Economically, older people are more likely to be saving money and less likely to be spending it.
On page 18: Older members of the population are likely to reduce the amount they save and once they retire from employment start spending the funds they have saved.

It maybe that I've missed out on the context in which these statements have been made, but aren't these statements contradictory?
I am confused. Please help. Thanks!
Click to expand...

Hi - yes, this does on the face of it sound contradictory! The points are intended to refer to slightly different phases of ageing. Younger people tend to spend a higher proportion of their income than saving it, but as they get older the proportion of income that is being saved will tend to increase (e.g. because disposable income levels are higher, because they no longer have to support children etc). This observation would be most relevant to those who are in employment. After ageing further and entering retirement, individuals start to move into the "disinvestment" phase, i.e. they start to spend their savings.

Hope that makes more sense?
 
NikitaMBM said:
Also in the same chapter, if one sees the solution of the core reading example, there is a term mentioned non-contractual termination. Can someone please tell me what does this mean?
(The statement I am referring to is "tax policy proceeds only in the event of non-contractual termination", on page 21)
Thanks so much! :)
Click to expand...

This basically means a surrender, i.e. where the policyholder has decided to terminate the contract rather than staying to the contractual end (the maturity date). So the point being made in the solution is that tax could be imposed on a surrender value (which is at the choice of the policyholder), but if the policyholder stayed to the natural end of the contract they would not face any taxation on the benefit received.
 
Hi Lindsay,

Thanks so much for resolving both my queries! :):)

Regards, Nikita
 
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