Hi....

When working out the emerging cost for early retirement..I am not sure what to do with the l*

This question relates to test 2 2014

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The l* is used for calculating the EPV of the benefits for pensions that are already in payment (i.e. after early retirement or withdrawal in the case of the question, which is from the UCT November 2013 exam).

Look at the context of the question. You are asked to analyse the expected emerging costs in years of age 63, 64 and 65. Hence, you should (for example) in the year of age 64 include the emerging costs from those who retired early in the year of age 63. Given that this cost is only incurred on the basis of survival after early retirement, you need to multiply by the l*.

This should now (hopefully) help you to make sense of the answers given in the memo.

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