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Pensions Question Paper

Pensions

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
BMS 310:
PENSIONS
DATE: Thursday, 27th November, 2008

TIME: 8.00 a.m. – 10.00 a.m.
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INSTRUCTIONS:
Answer question 1 and any other 2 questions.
Question 1
a)
Explain the classes of persons exempted from contribution to the NSSF of Kenya (10 marks)
b)
Kamau belongs to a defined contribution scheme. His opening balance as at 1st January 2006 was Ksh 100,000. Kamau and his employer have been remitting a total of Ksh 5,000 per month in arrears to the scheme from January to December 2007. The fund manager declared a rate of interest of 12% for the year 2007, compounded monthly. Calculate the accumulated benefits due to Njoroge as at 31st December 2007 reflected in his benefits statement (10 marks)
c)
Schola belongs to a defined contribution, contributory, pension scheme in Kenya and is retiring in two week’s time, having attained the Normal Retirement Age of the scheme. Her accumulated pension dues as per her statement are Kshs 8,000,000.
i)
Compute the maximum amount she can commute. (2 marks)
ii)
Compute her net benefits after taxation without commutation if she had been in the scheme for at least 15 years and it was a provident fund (4 marks)
iii)
Compute her net benefits after taxation without commutation if she had been in the scheme for less than 15 years and it was provident fund. (4 marks)

Question 2
Mwachiti belongs to a defined benefit contributory scheme with a guarantee of 10 years
and assumed interest over time of 11%. The formula for the benefits as per the trust
n
deed of the scheme is:
?
.
p
480
The normal retirement age of the scheme is 65 years. Mwachiti was born on 1st January 1946 and joined the scheme on 1st January 1975. His salary in the last year to retirement was Ksh 5,000,000 per annum. Required:-
i)
Compute the annual pension payable to him (5 marks)
ii)
Compute the cash equivalent to him (5 marks)
iii)
Compute the maximum he can commute (5 marks)
iv)
Compute the reduced pension if Conlet commutes the maximum amount (5 marks)

Question 3
a)
Explain the difference between defined and defined contribution schemes (10 marks)
b)
Briefly discuss the strategies that can be employed by scheme trustees to ensure that members understand and appreciate the benefits of their staff retirement benefits scheme. (10 marks)

Question 4
a)
Kevin opts to commute Ksh 500,000 of his pension and the balance is used to
purchase an annuity which pays Ksh 8,000 at the end of each month. If the
expectation of life at the age of retirement is estimated to be 15 years and interest
at 8% accruing monthly. Determine Kevin’s accumulated pension before
commutation and purchase of annuity (10 marks)
b)
Explain the reasons that may lead to an employer establishing a staff retirement
benefits scheme for the employees. (10 marks)

Pensions Question Paper

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