Funding

Question 1

Lump sum in advance

Answer 1

Designed to be sufficient to meet al future outgo

• entire payment made immediately
• reduce employer balance sheet assets
• payments may or may not be sufficient
• depending o actual vs expected experience

Question 2

Book reserve

Answer 2

• no explicit funds set aside
• provision in company accounts
• accounting for costs
• assets held in some physical form
• partially funded book reserv in this case
• actual benefit payments managed on an ongoing basis