Insured assets
Hi Dee22
I think you're right. The topic of insured assets is somewhat historic in nature, (it hasn't been examined since 2000 but as with any topic, you can bet that it will be on the exam if you don't understand it).
So much so that almost all pensions students and the more recently qualified pensions actuaries will not have seen how it works in practice. I certainly never came across these contracts in my practical pensions consulting days!
1. The contracts will almost certainly be in the trustees' name. They are unlikely to want to voluntarily surrender just one member's policy at a time, so the issue of partial voluntary surrender is I think unlikely in practice. The situation on reallocation of money on death would be similar to that on retirement.
2., 3. and 4. The life office would allocate money to each of the contracts, using seniority purchase. The exact details of how they do this is not covered by SA4. There wouldn't be a "partition" of money as if there are too few or too many assets backing a single member at retirement they would be obtained from or moved to the other members.
5 and 6. I guess this depends on the exact wording of the contract. Your suggestion seems most likely bearing in mind that the liability to provide the defined benefits (or in this case a transfer value of those benefits) remains with the scheme. An alternative may be that the scheme could agree in advance with the insurance company that contracts could be cashed-in on an individual basis as members transfer-out.
Any students out there who work or have worked in this area and can enrich the above with their "real-life" experience?
I hope this is helpful, but I think you are right not to spend a disproportionate amount of time on this section.
Best wishes
Stuart Underwood
Last edited by a moderator: Jan 21, 2011