Important Points for IC 83 - Group Insurance and Retirement Benefit Schemes Exam
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If the member dies before retirement and the benefits are not insured, the accumulated fund may be very small and insufficient to provide an appropriate benefit for a dependent.
If a member retires on ill-health grounds before retirement, the insurance could be used to: top up the accumulated fund which is then used to provide cash and purchase an annuity, provide an income of a percentage of the members salary until retirement or the members health recovers.
The key assumptions while estimating what annuity might be purchased from the fund in any projections are: the investment return the insurance compnay would use, the rate of any pension increases, the mortality rate assumption, the insurance companys expense and profit margins.
In defined contribution schemes the member takes on the investment risks and can usually control the way in which their funds are invested.
Under Income drawdown arrangement the fund remains invested, instead of buying an annuity, and the member withdraws an amount of the fund each year.
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