Exam F204

On the May 2010 exam paper for F204, question 3 ii and iii indicates that the employer wants to outsource his pension, and then states what assumptions the insurance company will be using for outsourcing. The first question is to determine the surplus in the scenario that the fund is discontinued, stating any other assumptions and estimates that you make.

The answer in the examiner's report makes general assumptions something along the following lines:

- Make an assumptions for the impact on the liability of a 1% decrease in the post-retirement net discount rate. Approximately 10-12%, so say 11%. They then adjust the liability based on this assumption.

The way I feel most comfortable with is to be more scientific about it (at least in my mind that's what I'm achieving). I made an assumption about the number of years pensioners are expected to live given their average age, and I made another assumptions regarding the life expectancy at NRA for the active members. From there I adjusted the liability using annuities calculated at the new rate.

In my mind what I did isn't wrong, I just didn't make such broad assumptions, but rather sort of calculated it from basic principles...

Similarly, for question iii) rather than converting the PUSCR over the next 20 years to an approximate for the AASCR, I rather used the formula: AASCR = PUSCR*one year annuity*future service/twenty year annuity. Would I get the marks for this in the exam?

Will I be awarded marks for my answer in the exam?



I made an assumption of the life expectancy at retirement age, and also post retirement for the pensioners, and from there adjusted the active members’ and pensioners’ liabilities as per the assumptions. However,