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Pensions using Traditional unit method - DHW Exercise 10.13b

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asked Nov 9, 2018 in BUS 3024S - Contingencies by shuri (580 points)


To calculate actuarial liability at 1 Jan 2009, I used the salaries as at 1 Jan 2009 as the final salary. However, I get an answer different to the solutions and they used salaries as at 1 Jan 2008.

What is the final salary I should use?

1 Answer

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answered Nov 9, 2018 by Njabulo.Dube (2,950 points)

From my understanding the traditional unit method makes no allowance for salary increases when calculating the actuarial liabilities.

In this question the salary increases are assumed to occur on the \( 31^{st} \) of December. So even though you are conducting the valuation on 1 Jan 2009 the employees have not yet accrued service based on the increases they have just received, so it makes sense to use the 2008 salaries.