College of Statistical and Actuarial Sciences

University of the Punjab, Q.A. Campus, Lahore

M.Sc. Actuarial Sciences

Mid Term Examination 2019
Paper: Employee Benefits Management Semester: VI
Marks: 35 Time Allowed: 1.5 hour
There will be no use of Mobile phone as Calculator. Mobile phone not allowed. There will be no transformation of calculators.

Q.1 A pension scheme provides a pension of 1/45 of final pensionable salary for each year of service, with a
maximum of 2/3 of final pensionable salary, upon retirement at age 65.
Final pensionable salary is defined as average annual salary over the 3 years immediately preceding
retirement. A member is now aged exactly 47 and has 14 years of past service. He earned £40,000 in the
previous 12 months. Calculate the expected present value now of this member’s total pension on
retirement, using the symbols defined in, and assumptions underlying, the Formulae and Tables for
Actuarial Examinations. (7)

Q.2 Calculate the expected present value of a disability benefit of £5,000 pa payable weekly to a healthy life
now aged 45. Assume that interest, mortality, sickness rates and recovery rates are consistent with those
given in the Tables. (7)

Q3 A pension scheme provides a pension of 1/60th of career average salary in respect of each year of
service upon age retirement between the ages of 60 and 65, and a proportionate amount in respect of any
incomplete years of service. Fiona, aged 48, has 13 years of past service, total past salary of £290,570
and expects to receive a salary of £30,000 over the coming year. Derive formulae for the expected
present values of Fiona’s past and future service pensions. Calculate these expected present values using
the values given in the Tables. (7)

Q.4 A pension fund offers the following benefit to its members: upon age retirement at any age, a member
will receive an annual pension equal to 1/60th of final pensionable salary for each year of service, up to
a maximum of two thirds of final salary. The pension fund is due to be valued on 1 July 2005. Salaries
are increased each year on 1 July. Final pensionable salary is defined to be the average salary earned
over the three years preceding retirement. Normal pension age is 65. At the valuation date, one member
is aged 40 exactly, has 18 years of past service and earned £32,000 over the last year. Calculate the
expected present value of the past and future service benefits for this member assuming that mortality,
retirement, interest and salary scale are as given in the Tables. (7)

Q.5 A pension scheme provides a pension of n/ 60 ths of final average salary payable from the normal
retirement age of 65. However, n is limited to a maximum of 40 years. Write down a commutation
function formula for calculating the total service liability for members with a whole number of years’
past service who joined the scheme:
(a) After age 25, and
(b) Before age 25. (7)