Question 2 Consider a social security system with 50,000 contributing members who are yet to go on retirement as at January 2010. On average, these 50,000 people have 16 years to go on retirement and have an average annual salary of 80,000 cedis as at January 2010. The scheme commits to pay contributing members a pension allowance each year till death. Realistically however, people are expected to live for an average of 13 years after going on retirement at age 60. Pension payments are based on an average of the 3 highest annual salaries of contributors. Typically, these three years are the final 3 years of the working life of contributors just before they go on retirement. Assume pension rights in the scheme is pegged at 3% per annum and the official discount rate is 5%. Annual salaries go up by an average of 11% each year to account for inflation and merit increases while pension allowances go up by an average of 8% each year. a) Given the background above, use a spreadsheet to estimate how much money the scheme must put away at the end of 2010 in order to meet their future obligations to these 50,000 people when they finally go on retirement. 30 marks b) Assuming all 50000 members worked and contributed to the scheme in 2011, how much in total must be set aside for each contributor for contributing to the scheme in 2010 and 2011? 10 marks c) The scheme found that as at January 2010, there already was an unfunded liability of 25 billion cedis. What is unfunded liability? How much of this unfunded liability must be paid each year in order to clear the unfunded liability in 16 years if the interest rate on the liability is 7%? 15 marks d) Using your spreadsheet, carefully show the beginning and end of year balances of this liability over the following 16 years as it is paid down to zero 20 marks