STAT3038/STAT6045 ACTUARIAL TECNHIQUES

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RESEARCH SCHOOL OF FINANCE, ACTUARIAL STUDIES

AND STATISTICS

College of Business & Economics

ACTUARIAL TECNHIQUES

(STAT3038/STAT6045)

Assignment 1 – 2021

General Instructions

● This assignment is worth 20% of the overall marks for STAT3038/STAT6045. The assignment is to be completed in the groups allocated for this assignment.

● All groups must submit an assignment of their own work, consisting of an Excel workbook and a Word report uploaded to Wattle by 12pm on Thursday 2 September 2021. Note that uploading these files to Wattle implies that your group has worked only together and not with other groups, and have abided by the principles of academic integrity.

● There are two discussion forums on Wattle you may find useful for the purpose of this assignment.

● “Assignment 1 Forum” will be open to all students to view and contribute to and should be used for any general questions you wish to ask of the course convener about the assignment. These general questions will initially only be answered in this forum – although a consultation with your group may be arranged if the question cannot be sufficiently answered by the course convener’s response in Wattle and your discussions with your group consultant.

● As discussed previously the “Group Forum – Assignment 1” will be open and viewable only to members of your group, group consultants and the course convener. You may use this forum, or any other medium preferred by your group, to share information over the duration of the assignment.

● Late assignments will not be accepted. Extensions may be granted on medical or compassionate grounds on production of appropriate evidence and must have the course convener’s permission. Requests for extensions should be submitted by email to the course convener well before the assignment is due, although they may be discussed informally with the course convener before making a request by email.

The question

Old Zealand is an independent nation in the Fictional Ocean. By incredible co-incidence Old Zealand happens to have the exact same population size and demographic balance as New Zealand, which is an independent nation in the Pacific Ocean. Old Zealand is also expected to have very similar changes in population size and demographics to New Zealand in future.

The Old Zealand Government is considering simplifying the old-age pension (“the pension”) from 1 January 2023 to be a flat $300 per week payment to all residents above the “retirement age” (currently age 65). No minimum length of residency would apply, and the benefit would be paid to all people living permanently in Old Zealand who reach retirement age. Pension payments would be indexed each year by the general wage index of Old Zealand.

In funding the cost of the pension, the government will introduce a levy (“the levy”) of Y% on all gross personal incomes (received from employment only) from 1 January 2023 onwards.

You are required to present the results of your group’s investigation in the form of a report to the Minister for Finance of the Old Zealand Government. In your investigation you have been asked to do the following:

a) perform and discuss a deterministic projection of the population demographics of Old Zealand on a (at a minimum) year-by-year and age-by-age basis until 31 December 2075;

b) calculate the value of Y% so that aggregate pension costs and the levy will be equal in 2023;

c) keeping the value of Y% calculated above constant, investigate and recommend any changes in the retirement age that will be required over the projection period in (a) to maintain the approximate equality of aggregate pension costs and the levy; and

d) comment on any issues you see with the design of the old-age pension and levy, along with recommendations on appropriate modifications; you do not need to present any additional numerical analysis for this part.

Assumptions you make in the investigation should be stated clearly in the report, along with stating the data and/or source that the assumption is based on. Ensure that you present results in a way that is easy to understand, is appealing to the eye, and meets the requirements of the stakeholder.

Specific Instructions

● Create an Excel workbook that generates the information required for your report. The workbook should be able to be easily used and interpreted by someone outside of the group (e.g. the person marking the assignment).

● Write the report as per the instructions above. The report should be created in Word and is to be a maximum of 4,000 words (including appendices).

● When completed, one person in the group must upload the Excel workbook and report (in Word format) to the “Assignment 1 – upload solution here” activity on Wattle. All group members must click on the “Submit” button in Wattle in this activity to confirm they are happy for the assignment to be submitted. Further, one person in the group must upload the Word report to the “Assignment 1 – upload solution here (TurnitIn)” activity on Wattle. This TurnitIn activity will be used as a check on academic integrity.

● After the group has submitted their assignment, everyone in the group must complete the “Assignment 1 Group Review” activity on Wattle. This survey will give everyone in the group an opportunity to review the contribution of each group member (including themselves) to the assignment. Anyone who has not completed the survey will not receive a mark for Assignment 1 until they complete the survey. In most situations each member of the group will receive the same mark for the assignment. However, there are circumstances where an individual student may receive a different mark than their other group members. These are:

○ The course convener may award an individual student a higher mark than others in the group where the survey reveals that the student contributed a significantly higher amount and standard of work than the rest of the group, whilst still meeting the rules set by the group. “Significantly” will typically mean contributing at least double the amount of work of all other group members. Where applicable, the individual will be awarded a mark that is weighted as 50% of their individual contributions to the assignment and 50% of the overall group mark. This adjustment will only be applied where the individual’s mark would increase by more than 10% (in absolute terms), will not be applied automatically, and must be applied for by the individual to the course convener.

○ The course convener may award an individual student a lower mark than others in the group where the survey reveals that the student has not met the rules set by the group. The amount of reduction in mark is at the discretion of the course convener, and can be up to a maximum of the total mark awarded to the assignment (i.e. the minimum mark given to a student in this instance is zero).

○ In both of these situations, it may be necessary for responses from all group members (without names attached) to the “Assignment 1 Group Review” to be made available to an individual group member in order for that group member to make their case. Please take this into account in ensuring that your responses to the “Assignment 1 Group Review” address the contribution and conduct of your group members and not the individuals themselves.

Marking criteria

Excel work

● 10% for ease of use of Excel workbook

● 29% for population projection and choice of assumptions

● 11% for calculation of pension and levy and choice of assumptions

Report to the Minister

● 5% for general report structure

● 5% for an appropriate executive summary

● 10% for description of population projection and description/justification of assumptions

● 2% for description of pension and levy and description/justification of assumptions

● 11% for population projection results presentation and discussion

● 11% for pension projection results presentation and discussion

● 6% for pension design issues comments

Note that, as long as the report can be understood, there will be no marks deducted for grammatical issues.