It states in the core reading that surrender profits (i) can be allocated to with profits asset shares, and (ii) can arise due to smoothing.
April 2014 Q1. It states a MVR is applied, making SV equal to unsmoothed asset share.
Noting that Smoothed AS > AS > GMB throughout 2013-15, it seems the purpose of the MVR is to not pay the smoothing cost to people surrendering. (Isn't there a TCF issue there & why would they not pay the face value of the guaranteed benefit?) I don't understand why the solution does not consider this smoothing cost as a surrender profit attributable to remaining asset shares?
Following from this, I'd like to clarify what a surrender profit actually is i.e. does it only represent the difference between 100% unsmoothed asset share and the amount paid out below it?
Last edited by a moderator: Sep 9, 2016