What is dependency ratio and why is it important, Finance Basics

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Question 1:

a) What is dependency ratio and why is it important for pensions?

b) For which types of schemes is dependency ratio mostly relevant? Explain

c) What is the global trend and forecast re dependency ratio in developed nations?

d) What are the factors that explain this trend in dependency ratio?

e) What are the measures available to mitigate the impact of changes in dependency ratio on pension costs?

Question 2:

You are contacted by an employee who wants details on defined contribution (DC) and defined benefit (DB) schemes.

a) Explain in very simple terms, using examples, how each of a DB and a DC scheme work.

b) List down the relative merits of each of a DB and DC scheme to the employee.

Question 3:

You are carrying out the annual actuarial valuation of the XYZ defined benefit pension scheme which pays a pension to the member and in case the pensioner dies, the pension continues to be paid to the surviving spouse and children till age 18. The scheme has active and deferred members and pensioners.

a) List down all the parameters for which you will need to formulate an assumption

b) What are the minimum data fields required to be able to carry out the actuarial valuation?

c) What are the data checks to be carried out prior to running the valuation, assuming you have the previous year's data?


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