Case Study: Transfer Values You are an associate actuary at a Caribbean actuarial consulting firm. A pensions client (pension plan A) has approached you to calculate the transfer values of three members who are leaving pension plan A to join pension plan B. A transfer value may be described as the actuarial present value of the vested accrued pension benefit that a member has in his pension fund. Both pension plan A and pension plan B are defined benefit (DB) plans. Data are as follows. Member Gender Age at Years of joining plan service before termination Final Normal pensionable retirement salary per age (plan A) annum 800,000 65 years 700,000 65 years 650,000 60 years X Y Z Male Male Female 20 years 25 years 30 years 5 8 12 Plan A offers an annual retirement benefit of 2% times final pensionable salary times years of service. The normal form of pension for plan A is an annual life annuity beginning at retirement age. Selected life annuity factors: 65 = 20 (males) go = 28 (females) Assume no pre-retirement mortality. Please answer the following questions, 1) Discuss the concept of portability in Caribbean pension plans. [2 marks] 2) Select and justify a suitable constant effective annual investment rate of return for this case. [2 marks] 3) Calculate the transfer values for each of X, Y and Z assuming they were all fully vested. [6 marks) Case Study: Transfer Values You are an associate actuary at a Caribbean actuarial consulting firm. A pensions client (pension plan A) has approached you to calculate the transfer values of three members who are leaving pension plan A to join pension plan B. A transfer value may be described as the actuarial present value of the vested accrued pension benefit that a member has in his pension fund. Both pension plan A and pension plan B are defined benefit (DB) plans. Data are as follows. Member Gender Age at Years of joining plan service before termination Final Normal pensionable retirement salary per age (plan A) annum 800,000 65 years 700,000 65 years 650,000 60 years X Y Z Male Male Female 20 years 25 years 30 years 5 8 12 Plan A offers an annual retirement benefit of 2% times final pensionable salary times years of service. The normal form of pension for plan A is an annual life annuity beginning at retirement age. Selected life annuity factors: 65 = 20 (males) go = 28 (females) Assume no pre-retirement mortality. Please answer the following questions, 1) Discuss the concept of portability in Caribbean pension plans. [2 marks] 2) Select and justify a suitable constant effective annual investment rate of return for this case. [2 marks] 3) Calculate the transfer values for each of X, Y and Z assuming they were all fully vested. [6 marks)
