Actuarial Science ACTS301 Assignment 2016

Introduction
You are an actuary working at NZAC, New Zealand Actuaries & Consultants.
You are the actuarial consultants to a large university pension scheme which
is winding up in other words, closing to future accrual on the 01/09/2016.
As a result you have been asked to calculate the present value of the
schemes liabilities (for actives, deferreds and pensioners) on the date on
which it is winding up, and the corresponding funding level. The Scheme
currently has $40million in assets.
When such an event takes place, should there be insufficient assets to cover
all the liabilities, then the members are paid their liabilities in accordance
with a priority order. The priority order outlines the order in which benefits
should be paid from the existing assets. The order is as follows
1.
2.
3.
4.
5.
6.

Pensioners (non-increasing pensions)

Pensioners pension increases
Deferreds (non-increasing pensions)
Deferreds pension increases
Actives (non-increasing pensions)
Actives pension increases

You are given the following benefit structure for the scheme:
Actives accrued pension calculated as: Salary * Service * 1/60

th

Pension based on the latest salary.

Retirement age is 65
Pension increases split by category of member are given below:
Category

Pension increases
annually by

Nil

Nil

inflatio
n

inflatio
n

4%

Also, accrued pension at 01/09/2016 increases annually between 01/09/2016

and retirement date by inflation
1. Decide on financial and demographic assumptions.
2. Calculate the value of the liabilities of the scheme as at the valuation
date using excel.
3. You are required to check your valuation results using. You should
provide evidence that these checks have been completed.

You are required to draft a short (10 page) valuation report which should
include sections covering the following:
Introduction
Assumptions

Data
Summary
Liabilities

purpose of valuation, method of valuation

market conditions at valuation date, derivation
of assumptions, summary of assumptions.
explanation of the impact of small changes in
assumptions
summary of data statistics split for actives,
deferred and pensioners
Value of liabilities at 01/09/2016 using your
assumptions.

Priority Order
on wind up

Outline the percentages of each category of

member benefits that can be paid

Conclusions

Your report should describe the deficit in the

scheme, and how this will affect the amount of
benefits that can be paid to each of the
different member classes.