You are working as an actuary for a large employer. Currently, the company offers a DC scheme to its employees, but it is considering redesigning the benefits available. Under a ne... You are working as an actuary for a large employer. Currently, the company offers a DC scheme to its employees, but it is considering redesigning the benefits available. Under a new scheme, new members will have a minimum investment guarantee of 0.75% per annum until retirement. a) Describe the stages and inputs of the actuarial control cycle with reference to the establishment of the guarantee. (20 marks) b) Outline three ways in which the trustees of a defined contribution pension scheme are involved in the funding of the scheme benefits. (5 marks)
Understand the Problem
The question involves actuarial concepts related to a defined contribution pension scheme. Part (a) asks for a description of the stages and inputs in the actuarial control cycle connected to establishing a minimum investment guarantee, while part (b) seeks an outline of the trustees' involvement in funding the scheme benefits.
Answer
Actuarial control cycle: Define, solve, implement, monitor. Inputs: demographics, economics, risk. Trustees: strategic objectives, investment oversight, legal compliance.
The actuarial control cycle involves stages such as problem definition, solution development, implementation, monitoring, and feedback. Inputs include member demographics, economic assumptions, and risk assessment. Trustees are involved in funding through setting strategic objectives, overseeing investment strategies, and ensuring compliance with legal requirements.
Answer for screen readers
The actuarial control cycle involves stages such as problem definition, solution development, implementation, monitoring, and feedback. Inputs include member demographics, economic assumptions, and risk assessment. Trustees are involved in funding through setting strategic objectives, overseeing investment strategies, and ensuring compliance with legal requirements.
More Information
The actuarial control cycle is iterative, ensuring continual improvement and adjustment. Trustees play a crucial role in ensuring the scheme is well-funded and managed according to fiduciary duties.
Tips
Common mistakes include underestimating the importance of accurate data input and neglecting the iterative nature of the control cycle.
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