Oct 09

[Jonny]

So How did you guys find it?
I thought question 1 was tough. What did you say about the reason the monthly payments had increased from 127 to 182?

Question 2 i thought was quite reasonable. In my opinion easier than question 1.
The pass rate is generally only between 30-40%. What do you reckon the pass mark would be 50-60%???

 

[capitalH]

Question 1:

I think what made it tough was the many impacts that caused the increase from 127 to 182. I had:

1. Change in investment assumption
2. Change in annuity price
3. Bad investment performance
4. Low contributions

Question 2.
Fairly straight forward, though I struggled with keeping the word count down.

Biggest challenge probably was how you chose to provide examples, as it had 4 variables. I chose to present it in a simple table, keeping 2 variables constant.

 

[SingingSong]

May have to retake in April (the one last chance)!

 

[avanbuiten]

Question 1:

1. Change in investment assumption
2. Change in annuity price
3. Bad investment performance
4. Low contributions

I got these points but was unable to quantify the individual impact of each of these factors.

Q2 was very reasonable.

 

[bystander]

Anyone comment that the remaining investment term is shortening?

As for someone saying next time is last chance saloon, if you do need that just look at it as a fresh attempt and don't add extra pressure on.

The subject isn't going away and you never know, you might find the course presentation aspect is less daunting than you fear.

Good luck with the results and remain positive that you may have already jumped the hurdle. You don't know until the examiners ink is dry!

 

[capitalH]

Anyone comment that the remaining investment term is shortening?

I implied it. Though not in so many words - I explained that if he earned 5% and made contributions 127 and the assumptions was unchanged - then he would have still have to invest only 127.

As for someone saying next time is last chance saloon, if you do need that just look at it as a fresh attempt and don't add extra pressure on.

The subject isn't going away and you never know, you might find the course presentation aspect is less daunting than you fear.

I need the pressure. I struggle to motivate my preparation for this subject, because of the constant feeling of, "I could do that".

But agree, if you do not work well under pressure, there will be other chances, this is not the end of the road.

 

[Busy_Bee4422]

Shortfall present values

I can see the reasons why the payments have increased. Part of the explanation rests on the issue that the shortfall has increased from last year to this year because;

(1) poor investments returns over last year
(2) the annuity rate change has increased the target amount.

The shortfall figures are present values. That makes the expalnantion interesting. How did you go about it?

I'm thinking along the lines that the present value shortfall is the difference between the amount they have now and the amount they would need now so that they would not need to make anymore contributions and still reach their target annuity if the investment grows as expected.

 

[Kail]

Surely

an elementary reason why the rate has gone up from £127 is the fact that he didn't pay that but only £50 over the last year, creating a bigger shortfal. No one's mentioned this so far...

 

[degreeless]

an elementary reason why the rate has gone up from £127 is the fact that he didn't pay that but only £50 over the last year, creating a bigger shortfal. No one's mentioned this so far...

Perhaps elementary, but not as significant as the change in assumptions.

....but of course still worth a mention.

With all the main ideas mentioned, I still only got to about 300 words for the first answer!

 

[Busy_Bee4422]

an elementary reason why the rate has gone up from £127 is the fact that he didn't pay that but only £50 over the last year, creating a bigger shortfal. No one's mentioned this so far...

Suppose the fund had actually grown at the assumed 5% and the annuity rate not changed. Would this not have meant that the shortfall would have dropped but the contributions would still have gone up because they would be being done over a shorter period now?

I'm thinking the shortfall has been driven up by the poor investment year and the change in annuity rate.

Am I missing something here?

 

[Rosencruz]

I actually covered:
1/. Shortfall in contributions
2/. Past investment returns
3/. Future investment assumptions
4/. Annuity rates

I don't think that the fact that he is closer to retirement is relevent: The recommended contribution is (I believe) level. So only changes in assumptions or experience being different from assumptions hsould change it.
I answered it using a step analysis, but I reckon this must be too complex, as it's only covered in the Fellowship exams...

Bigges problem was the 2nd question. I wrote far too much (~700 words) and needed to trim it down.

 

[avanbuiten]

an elementary reason why the rate has gone up from £127 is the fact that he didn't pay that but only £50 over the last year, creating a bigger shortfal. No one's mentioned this so far...

That's what I meant when I listed low contributions. I put it as my last point becasue it is the least significant.

 

[Busy_Bee4422]

Examiners' Report

Finally the examiner's report is out. Interesting answers. I see an error in the answer for Qn 1 where they explain the calculation. Points (B) and (C) are not consistent.