For policy B in this question, it is a with profits policy of £100k basic SA with 5% simple bonus vesting at end of each yr. How come when they calculate the premium they only allow for the basic SA and ignore bonuses? When I first looked at this question I thought the policies A and B were the same! Since policy A is £100k SA increasing by £5k at end of each yr. Can anyone help?
I've found the answer to my own question (and now i feel stupid!) but just in case anyone else gets stuck on this. see chapter 6 section 5.3 when calculating net premium reserves for with profit policies, the premium used in the calculation should - use mortality and interest assumptions from reserving basis -make no allowance for any expenses or bonuses the EPV of future benefits should -take account of bonuses added so far, but make no allowance for future bonuses
