The retirement benefit of a defined benefit superannuation fund is defined as follows: Retirement Benefit is 10% times Final Average Salary times Years of

The retirement benefit of a defined benefit superannuation fund is defined as follows:

Ø  Retirement Benefit is 10% times Final Average Salary times Years of Membership

Ø  Final Average Salary means the average of your salary over the 12 months immediately before the date of calculation

Ø  Years of Membership means the period from the date you joined the superannuation fund to the date of calculation, measured as years and complete months

The membership details for Tom Smith are:

Ø  Date of birth               25/5/1965

Ø  Date joined fund        15/2/2000

Ø  Recent Salary History

o   1/1/2018         $98,000

o   1/1/2019         $105,000

o   1/1/2020         $115,000

Ø  On 1 January 2021, salary increased to $120,000 

a.     Determine Tom's 'accrued' retirement benefit as at 30 June 2021, that is, the retirement benefit payable on this date assuming the member was eligible to retire, based upon membership to the date of calculation. 

[2 marks]

The superannuation fund also allows members to join the defined contribution (accumulation) section. Under this section members nominate the death benefit amount (sum insured) they wish. The fund then charges weekly insurance premiums determined using premium rates per $1,000 sum insured. An extract of the weekly premium rate is illustrated below.

Age

Weekly Insurance Premium per $1,000 Sum Insured

50

0.010

51

0.015

52

0.020

b.     Assuming a sum insured of $100,000 which remains constant throughout, calculate the insurance premium over the full year for a member aged 50 years and 3 months at the start of the year.