ST4: CMP Upgrade 2013/14 Page 1

Subject ST4
CMP Upgrade 2013/14

CMP Upgrade

This CMP Upgrade lists all significant changes to the Core Reading and the ActEd
material since last year so that you can manually amend your 2013 study material to
make it suitable for study for the 2014 exams. It includes replacement pages and
additional pages where appropriate. Alternatively, you can buy a full replacement set
of up-to-date Course Notes at a significantly reduced price if you have previously
bought the full price Course Notes in this subject. Please see our 2014 Student
Brochure for more details.

This CMP Upgrade contains:

All material changes to the Syllabus objectives and Core Reading.

Changes to the ActEd Course Notes, Series X Assignments and Question and
Answer Bank that will make them suitable for study for the 2014 exams.

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1 Changes to the Syllabus objectives and Core Reading

1.1 Syllabus objectives

There have been no changes to the Syllabus Objectives for the 2014 examinations.

1.2 Core Reading

There have been no changes to Core Reading for the 2014 examinations.

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2 Changes to the ActEd Course Notes

In this section we list material changes to the ActEd text.

Throughout the Course Notes, the time of writing should be changed from May 2012
to May 2013. This affects Page 12 of Chapter 1, and Page 1 of Appendix Benefit
provision in practice.

Study Guide

You should download a new copy of the ST4 Study Guide from our website,
www.acted.co.uk.

Chapter 1

Page 12

The following paragraph has been updated to reflect the latest versions of the Technical
Actuarial Standards (TASs) and now reads:

At the time of writing (May 2013) these standards can be found on the website of the
Financial Reporting Council at www.frc.org.uk with the current versions dated as
follows:
TAS D Version 1, November 2009
TAS R Version 2, November 2009
TAS M Version 1, April 2010
Pensions TAS Version 2, November 2012
Transformations TAS Version 1, December 2010.

There is also a Financial Reporting Council specific Funeral Plans TAS Version 1,
February 2011. Again, the content of this standard is beyond the scope of Subject ST4.

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Chapter 5

References to the Board for Actuarial Standards or BAS have been changed to Financial
Reporting Council or FRC throughout this chapter.

Page 8

The following sentence has been added:

The Board for Actuarial Standards was part of the Financial Reporting Council (FRC).
Recently the FRC has restructured and at the time of writing, (May 2013) the
responsibility for Technical Standards now rests directly with the FRC.

Chapter 10

Page 19

The definition of interest cover has been corrected and now reads:

Interest cover is:

Profit on ordinary activities before interest and tax

Interest payments due on that issue of loan stock and all prior loan stock

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3 Changes to the Q&A Bank

Part 3

A few changes have been made to the solutions for 3.1 3.3, which are set out below:

Solution 3.1

A deterministic model is one where the user gives the parameters fixed values. The
result is a single outcome. [1]

Solution 3.2

A stochastic model is one where the parameters are given probability distributions of
values. The user has some input, eg deciding which probability distributions to use.
The model is run very many times and the result is a distribution of outcomes. [1]

Solution 3.3

Sensitivity testing

Individual parameter values within the deterministic model could be varied. []

This would give a range of results to demonstrate, to a limited extent, the sensitivity of
the results to the chosen parameter values. []

Scenario analysis

Some or all of the parameters could be changed at the same time. []

For example, the user could test separately sets of assumptions that are pessimistic /
prudent, best estimate/realistic and optimistic / generous. []

This would enable the user to explore the impact of different scenarios on the results.
[]
Stress testing

One or more parameter values could be stressed to determine the impact on the results
of more extreme changes. []

For example, the impact on a pension schemes funding level of a prolonged recession
could be tested. []
[Maximum 2]

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Part 6

Question 6.12

Dates have been rolled forward by one year.

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4 Changes to the X Assignments

Assignment X2

Question 2.6

The following points have been added to the solution:

Portability there may be a requirement to allow members who leave employment to

transfer their account to their new employer or an insurance provider. []

Eligibility there may be restrictions that reduce the employers ability to only offer
benefits to specific groups of employees. []

Mandatory joining there may be restrictions that force the employer to automatically
enrol its employees into a pension scheme. []

Question 2.8

The following changes have been made to the rounding in the solution:
The expected cost of funding the 1/45th pension should be rounded to 33.33%
(rather than 33%) and as a result
the employees share is then 11.33% (rather than 11%)
the reduction in basic salary is then 8.33% (rather than 8%), and
the amount of holiday that would be required to fund the extra accrual is 19
days (rather than 19 days).

The second paragraph in the section on Core benefits should also refer to 19 days,
and the second bullet point within this paragraph now reads:
What will be the effect on the employees health if they take little to no holiday? []

Question 2.9

In part (iii) the date in the second paragraph has changed so the sentence now reads:

... eg a female attaining age 60 in January 2016 now ...

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Assignment X3

Question 3.6

The following points have been added to the solution to part (ii):

The model should be documented appropriately an audit trail should be produced so

that those using or refining the model can clearly see what has been done. []

Any limitations to the model should be noted. []

The modelling process should follow the principles of TAS M Modelling. []

Assignment X4

Question 4.3

The following point has been added at the start of the solution:

The cost is more predictable than for a DB scheme as the cost to the employer does not
depend on experience such as investment returns and mortality. [1]

Assignment X6

Question 6.3

The wording of the question has changed and now reads:

State the possible courses of action that a scheme may take when a deficit is revealed
following the valuation of a final salary pension scheme, and comment on their
suitability. [8]

Question 6.6

Dates have been rolled forward by one year.

Under the heading Contributions paid an extra point has been added to the solutions:

If the contributions were calculated using a funding method that generates a surplus
(and those contributions were paid) this would lead to an improvement in the funding
position. []

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5 Other tuition services

In addition to this CMP Upgrade you might find the following services helpful with
your study.

5.1 Study material

We offer the following study material in Subject ST4:

Additional Mock Pack (AMP)
ASET (ActEd Solutions with Exam Technique) and Mini-ASET
Flashcards
Mock Exam
Revision Notes
MyTest
Sound Revision.

For further details on ActEds study materials, please refer to the 2014 Student
Brochure, which is available from the ActEd website at www.ActEd.co.uk.

5.2 Tutorials

We offer the following tutorials in Subject ST4:

a set of Regular Tutorials (lasting three full days)
a Block Tutorial (lasting three full days)
a Revision Day (lasting one full day).

For further details on ActEds tutorials, please refer to our latest Tuition Bulletin, which
is available from the ActEd website at www.ActEd.co.uk.

5.3 Marking

You can have your attempts at any of our assignments or mock exams marked by
ActEd. When marking your scripts, we aim to provide specific advice to improve your
chances of success in the exam and to return your scripts as quickly as possible.

For further details on ActEds marking services, please refer to the 2014 Student
Brochure, which is available from the ActEd website at www.ActEd.co.uk.

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6 Feedback on the study material

ActEd is always pleased to get feedback from students about any aspect of our study
programmes. Please let us know if you have any specific comments (eg about certain
sections of the notes or particular questions) or general suggestions about how we can
improve the study material. We will incorporate as many of your suggestions as we can
when we update the course material each year.

If you have any comments on this course please send them by email to ST4@bpp.com
or by fax to 01235 550085.

IFE: 2014 Examinations The Actuarial Education Company