Hi,
1. For a unit-linked contract, what is the difference between a non-unit fund and a non-unit reserve? Are they completely separate? If not, how are they related? <-- just did a search on the forum, i understand how they are related now.
http://www.acted.co.uk/forums/showthread.php?t=3250
2. If actuarial funding is used, then there'll be a large non-unit fund at the start. What is this non-unit fund used for, is it profit released to the company right away? <-- also answered in the linked thread above
On page 7 of chapter 14, it says "The transfer from unit-fund to non-unit fund reduces the future management charges transferred from the unit-fund to the non-unit fund, because the charge is only levied on the actual number of units purchased. It also creates an additional liability on the non-unit fund because on the death of the PH, the amount required to make up the bid value of the unit fund to the guaranteed min SA will be larger. This expected additional death cost is a charge on the non-unit fund at each year end."
3. I understand how a charge on a unit fund for mortality works, but how does a charge on the non-unit fund work? And where would this charge go?
In the example on page 9 of chapter 14, with actuarial funding, the unit fund has 540.33, and the non-unit fund has 459.67.
4. The question didn't mention initial expenses, but say if initial expenses = 1000. Does that mean that the NBS is 1000+540.33-459.67=1080.66?
Sorry if the questions don't make sense. I'm really really confused with unit-fund, and having no work experience in unit-linked contracts makes it all the more difficult!!
Thanks.
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