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r04 > 04. Pensions regulation > Flashcards

04. Pensions regulation Flashcards

1
Q

When was The Pensions Regulator (TPR) established?

A

By the Pensions Act 2004.

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2
Q

Name the TPR’s 2 main purposes.

A
  • To regulate work-based pension schemes.
  • And support employers in complying with their auto-enrolment duties.

=> Prevent problems from developing.

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3
Q

Name 5 responsibilities of the TPR.

A
  • Ensure auto-enrolment is happening.
  • Protect people’s savings in workplace pensions.
  • Improve the way workplace pensions are run.
  • Reduce the risk of pension schemes ending up in the PPF.
  • Ensure balance between need for DB scheme and growing the business.
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4
Q

What are the 3 broad categories that the TPRs powers fall into?

A
  • Gathering information.
  • Regulation & enforcement action.
  • Acting against avoidance.
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5
Q

The TPR gathers information from a number of sources to help identify and monitor risk. Name 4 sources.

A
  • Employer declarations and scheme reports that they are complying.
  • Run a ’whistleblowing’ helpdesk.
  • Review recovery plans from DB schemes.
  • Share information and liaise with other regulators.
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6
Q

Name 5 options if the TPR decides enforcement action is required.

A
  • Issue improvement notices on individuals/firms.
  • Take action to recover unpaid employer contributions.
  • Prohibit individuals/firms from involvement in schemes.
  • Issue fines / prosecute some offences in criminal courts.
  • Prohibit trustees from operating.
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7
Q

The TPR can act if it believes an employer is deliberately trying to avoid its pension obligations and is relying on the PPF to pick up its liabilities. Name 2 things it may issue.

A
  • Contribution notice.
  • Financial support direction.
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8
Q

How long can the TPR issue contribution notices?

A

6 years after an act, or failure, took place.

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9
Q

How long can the TPR issue financial support directions?

A

Up to 2 years after the relevant time.

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10
Q

What is a clearance procedure?

A

Something available to employers who wish to confirm that a certain transaction will not be subject to TPR’s anti-avoidance powers.

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11
Q

What is the Financial Ombudsman Service (FOS)?

A

An independent, statutory dispute-resolution scheme.

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12
Q

How is the FOS funded?

A

By levies on authorised firms.

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13
Q

What are the rules regarding the following being eligible complainants for the FOS?

  • Charities.
  • Trustees.
  • Micro-enterprises.
  • Small businesses.
A
  • Annual income less than £6.5m.
  • Trust’s NAV less than £5m.
  • No more than 10 employees and turnover or BS total of no more than 2m euros.
  • No more than 50 employees and turnover or BS total of no more than £6.5m.
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14
Q

Name 3 examples of complaints to the FOS.

A
  • Wrongly advised to transfer pension.
  • Advised to take out unsuitable pension.
  • Excessive delay in setting up annuity, causing financial loss.
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15
Q

When can the FOS not deal with complaints?

A

When they are about an occupational scheme linked to an individual’s employment and the complaint is about the employer/administrator of that scheme. (Pensions Ombudsman).

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16
Q

Before a complaint can be sent to the FOS, it must be raised with the firm in question. How long do they have to resolve the complaint?

A

8 weeks.

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17
Q

Complainant can refer their complaint to FOS within the earliest of:

A
  • 6 months of date of firm’s final response.
  • 6 years from event complained about, or if later…
  • 3 years after complainant knew or should have known they had cause for complaint.
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18
Q

If the FOS upholds the complaint, name 5 things it has the power to impose.

A
  • Money award.
  • Award for distress & inconvenience.
  • Interest award.
  • Cost award.
  • Directions.
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19
Q

What is the maximum money award?

A

£415,000 where complaint referred to FOS on or after 1 April 2023.

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20
Q

Name 3 ways the FOS can award interest.

A
  • As part of the money award.
  • On top of a financial award.
  • After the financial award has been calculated.
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21
Q

The FOS will only investigate complaints about the sale & marketing of products issued by which type of companies?

A

FCA regulated ones.

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22
Q

What is the Pensions Ombudsman?

A

An independent organisation set up by law that deals with complaints about how pension schemes are run, i.e. maladministration.

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23
Q

What other bodies can the Pensions Ombudsman consider companies against?

A

The Pension Protection Fund (PPF) and the Financial Assistance Scheme (FAS).

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24
Q

Name 4 things that the Pensions Ombudsman cannot investigate complaints about.

A
  • State Pensions.
  • Tracing lost pensions.
  • Mis-selling of pensions.
  • A decision made by a tribunal, court or other Ombudsman.
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25
Q

What is the cost of the Pensions Ombudsman service to the end user?

A

No cost - free.

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26
Q

What is the financial limit on the amount of money that the Pensions Ombudsman can instruct a firm to pay?

A

No limit.

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27
Q

Name 4 criteria for the Pensions Ombudsman investigating complaints.

A
  • Current or former members of pension scheme.
  • Widow/widower/surviving cp or dependant of member who has died.
  • Owner of pension credit from current or former pension scheme.
  • Someone nominated by member of their estate to take complaint to PO.
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28
Q

What is the Money and Pensions Service, The Pensions Advisory Service (TAPS) and Moneyhelper?

A

TAPS is part of Moneyhelper. Moneyhelper is a free service provided by the MAPS, sponsored by the DWP, to provide pensions information and impartial advice for everyone.

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29
Q

What is the Pension Protection Fund (PPF)?

A

An insurance scheme designed to protect members of DB & hybrid schemes (only DB section of hybrid schemes) who have experienced an insolvency event and scheme is underfunded, or funds have been misappropriated through fraud.

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30
Q

Name 3 levies which fund the PPF.

A
  • Administration levy.
  • Fraud compensation levy.
  • Pension protection levy (scheme based & risk based).
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31
Q

Name 5 requirements for a PPF to take responsibility for a scheme.

  • Type of scheme.
  • Wind up date.
A
  • Must not be a DC scheme.
  • Must not have commended wind up before 6 April 2005.
  • Qualifying insolvency event must have occurred.
  • Must be no chance scheme can be rescued.
  • Must be insufficient assets.
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32
Q

The insolvency event starts what?

A

An assessment period to ensure PPF entry eligibility is met.

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33
Q

How long can the PPF insolvency assessment period last?

A

Up to 2 years.

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34
Q

During the assessment period, the trustees remain in day-to-day control of the scheme but… [5]

A
  • No new members.
  • No further benefits or transfer values paid.
  • Benefits capped at PPF limits.
  • PPF will review any ‘moral hazard’ issues.
  • Will value the assets of the fund vs liabilities (Section 143 valuation).
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35
Q

When might transfers out during an assessment period be authorised?

A

Where the member requested and accepted the transfer value in writing before the assessment date.

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36
Q

When is a Section 143 valuation carried out?

A

To determine whether there are insufficient assets within the scheme.

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37
Q

For whom are the PPF compensation limits 50%?

A

Survivors’ benefits for any spouses/cp/relevant partner/ dependants pension, or payment to dependant children (only 25% if one child).

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38
Q

For whom are the PPF compensation limits 90%?

A

Members who have not yet reached the scheme’s NRA.

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39
Q

For whom are the PPF compensation limits 100%?

A

Members already in receipt of pension as reached NRA, or receiving a survivor’s pension, or retired on ill-health grounds.

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40
Q

What is escalation?

A

The increase in payment once members start to receive their compensation from the PPF.

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41
Q

Revaluing benefits of deferred members for service:

  • before 6 April 2009
  • after 6 April 2009
A

Increased in line with:

  • CPI to max. 5%.
  • CPI to max. 2.5%.
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42
Q

Escalation (increases) in benefits in payment:

  • before 6 April 1997
  • after 6 April 1997
A
  • No increase.
  • CPI to max. 2.5%.
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43
Q

A PPF trivial commutation lump sum can be paid once a scheme has been transferred and where a member: [3]

A
  • has reached normal min. pension age (currently 55).
  • is under age 75.
  • has £30,000 max. overall benefits.
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44
Q

What is the Financial Assistance Scheme (FAS)?

A

It assists those who have lost pension benefits through company insolvency but were not covered by the PPF.

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45
Q

Since when has the FAS been closed to new members?

A

1 Sep 2016.

46
Q

The FAS helps those who have lost their pensions from DB schemes wound up between ~ and ~.

A
  • 1 Jan 1997
  • 5 Apr 2005.
47
Q

The FAS will pay up to ~ of the pension with a cap of ~ a year for those whose entitlement begins Apr 2023.

A
  • 90%
  • £41,888 p.a.
48
Q

How do payments from FAS increase each year?

A

in line with increases to CPI max. 2.5% for service from 6 Apr 1997.

49
Q

How much FAS payments is a surviving spouse/cp entitled to?

A

50%.

50
Q

What are the 3 categorisations of worker under workplace pensions and briefly describe them.

A
  • Eligible jobholder: must be automatically enrolled and only the employee can choose to opt-out.
  • Non-eligible jobholder: will not be automatically enrolled but have a right to opt-in.
  • Entitled worker: will not be automatically enrolled but have a right to ask to join the scheme.
51
Q

For an eligible jobholder, name 2 qualifying criteria?

A
  • Aged between 22 to SPA.
  • Annual earnings over £10,000.
52
Q

For an eligible jobholder, what is the duty of the employee?

A

To make the min. employee contributions unless they wish to opt-out.

53
Q

For an eligible jobholder, what are the employer requirements regarding:

  • Enrolment.
  • Contributions.
  • Admin.
  • Re-enrolment.
  • Compliance.
  • Onboarding.
A
  • Must automatically enrol to scheme.
  • Must make at least min. contributions.
  • Must process any opt-out notices.
  • Must re-enrol every 3 years.
  • Must register compliance with TPR.
  • Must provide info to members within their 6 week joining window.
54
Q

What is the qualifying criteria for non-eligible jobholders?

A

Doesn’t meet the criteria of an eligible jobholder, i.e. not aged between 22 - SPA, or earns between the LEL and £10,000.

55
Q

If a non-jobholder opts-in, what is it then their duty to do?

A

Make the min. contributions, but can opt-out again if they wish.

56
Q

For non-eligible jobholders what are the employer requirements regarding:

  • Enrolment.
  • Contributions.
  • Opt-outs.
A
  • Must enrol those who opt into the scheme.
  • Must make at least min. contributions.
  • Must process any opt-out notices if the employee wishes.
57
Q

What are the qualifying criteria for entitled workers?

A

They do not meet the criteria of either eligible or non-eligible jobholders and earn below £6,240.

58
Q

For entitled workers, what are the employer requirements regarding:

  • The scheme.
  • Contributions.
A
  • Provide scheme information.
  • Not required to make contributions.
59
Q

An employer can postpone, i.e. defer the date on which it assesses a worker, for how long?

A

3 months, to what is called the deferral date.

60
Q

Name 5 exceptions where employer duties in relation to an eligible / non-eligible jobholder & entitled worker do not apply.

A
  • Worker has opted-out.
  • Worker has given/been given notice.
  • Worker has reasonable grounds to believe they have HMRC protection from tax charges on their pension savings.
  • Worker has been paid a winding up lump-sum payment.
  • Worker who meets the definition of a ‘qualifying person’ with separate UL legislation.
61
Q

What are ‘qualifying earnings’?

A

All earnings between £6,240 and £50,270 which could come from:

salary or wages / overtime / commission / bonuses / benefits (exc. P11Ds).

62
Q

What are the minimum contribution limits for the:

  • Employer.
  • Employee.
A
  • 3%.
  • 5%.
63
Q

What are 2 alternatives to basing min. contributions on qualifying earnings?

A
  • Basic pay.
  • Pound zero approach.
64
Q

What are the 3 sets of min. contributions published by TPR?

A
  • Set 1: Basic pay only, min. 9% (employer 4%).
  • Set 2: Pensionable pay, min. 8% (employer 3%). Definition of pensionable pay must be 85%+ of earnings.
  • Set 3: All earnings, min. 7% (employer 3%).
65
Q

Which 2 types of workers do not have the right to opt-out and if they wished to leave the scheme, would have to cease membership under scheme rules.

A
  • Workers who enrolled under contractual enrolment.
  • Entitled workers who asked to join the scheme.
66
Q

What is the opt-out period?

A

One month starting from the later of the date:

  • active membership was achieved.
  • worker received the employer’s letter containing enrolment info.
67
Q

If the employer receives an invalid opt-out notice, they must explain why it is invalid, and what is the one month opt-out period extended to?

A

6 weeks.

68
Q

When must an employer refund contributions after an opt-out? [2]

A

Either 1 month after receiving the valid opt-out notice or by last day of 2nd pay reference period (so ideally next available payroll run after receiving the opt-out notice).

69
Q

Many employers will have their own occupational schemes whereas smaller schemes often use ___.

A

multi-employer master trust schemes, e.g. NEST (govt.) or the People’s Pension (B&CE, originally construction industry).

70
Q

NEST charges are:

A
  • 0.3% AMC
  • 1.8% on contributions made (no employer set up charge).
71
Q

People’s Pension charges are:

A
  • £2.50 annual charge
  • 0.5% management charge (though rebates may apply).
72
Q

Name the 5 bands for People’s Pension AMC rebates.

A
  • <£3,000: No rebate.
  • £3,000 - £10,000: 0.1% rebated.
  • £10,000 - £25,000: 0.2% rebated.
  • £25,000 - £50,000: 0.25% rebated.
  • > £50,000: 0.3% rebated.
73
Q

What are the 3 ways making pension rights the subject of a claim?

A
  • Offsetting.
  • Earmarking.
  • Pension sharing.
74
Q

What is offsetting?

A

The value of the pension is ‘offset’ against the other assets of the marriage. i.e. pension is left with the member and other assets are used to split the wealth.

75
Q

How does offsetting work?

A

The ex-spouse receives a greater share of the non-pension assets in return for the loss of their ‘share’ of the member’s pension.

The pension is given a lump-sum value in today’s terms (CETV on DB schemes), then the ‘offset’ could be either capital or income.

76
Q

With offsetting, what is the impact on both parties’ lifetime allowances?

A

No impact on either parties as there has been no change in ownership of the pension.

77
Q

What is an advantage of offsetting.

A

It provides a clean break with no long term implications.

78
Q

What is earmarking?

A

Benefits in the member’s pension scheme (could be income and/or lump-sum) are earmarked for the ex-spouse when the member crystallises their benefits in the future (may be on retirement or death).

An I.O.U effectively.

79
Q

Who retains ownership when pension rights are earmarked?

A

The member.

80
Q

What are the 2 types of earmarking order?

A
  • Earmarked periodic payments orders (expressed as a % of member’s pension).
  • Earmarked lump-sum orders.
81
Q

How are the 2 types of earmarking orders taxed?

A
  • Earmarked periodic payments orders: member is deemed to have received the whole income and is taxed accordingly, therefore whole income is taxed at member’s marginal rate.
  • Earmarked lump-sum orders: no taxation issues as tax-free.
82
Q

Name 6 disadvantages of earmarking.

A
  • Benefits earmarked to spouse not payable until member secures them & courts have no power to set a date by which member must take them.
  • Ex-spouse has no control as to whether pension benefits are transferred between schemes.
  • Ex-spouse has no control over member’s investment decisions.
  • Easy for ex-spouse to lose track of earmarking order (last known address).
  • Issues on death-re-marriage.
83
Q

What happens to an earmarking award if the member dies?

A
  • Earmarked periodic payment order ends & ex-spouse loses benefit.
  • Death in service benefits paid out if member dies before taking their benefits.
84
Q

What happens to an earmarking award if the ex-spouse dies?

A
  • Order for periodic payment order ceases.
  • Lump-sum order may remain & will be payable to ex-spouse’s estate, but only when member draws benefits.
85
Q

What happens to an earmarking award if the member remarries?

A

Earmarking order continues.

86
Q

What happens to an earmarking award if the ex-spouse remarries?

A
  • Any earmarked periodic payment orders no longer have legal standing.
  • Lump-sum orders remain in place.
  • Co-habitation can lead to member seeking and possibly gaining a varying order in the courts.
87
Q

Name 5 advantages of earmarking.

A
  • No money/assets change hands at point of divorce.
  • If member remarries, new spouse and/or other dependants may benefit on their death as periodic payment orders to ex-spouse will cease.
  • If ex-spouse dies before or soon after benefits commence, member will receive their full pension benefits.
  • If ex-spouse remarries, periodic payment order will lapse.
  • Member has full control over timing of benefits, where funds are invested and any decision to transfer benefits.
88
Q

What is pension sharing?

A

Part of the member’s pension is transferred to the ex-spouse who then holds those assets in their own pension plan.

89
Q

What 4 type of pension cannot be shared?

A
  • NSP
  • BSP
  • GRB
  • Widow(er) pension in payment.
90
Q

Under pension sharing for a DC scheme, what 2 options are available to the ex-spouse once a % share is awarded to them?

A
  • They can transfer it to their own occupational/personal scheme.
  • Or original scheme may offer membership to ex-spouse.
91
Q

Under pension sharing for a DB scheme, what must be offered to the ex-spouse and what does not have to be offered?

A
  • The option of a transfer value.
  • Scheme membership.

Nb. opposite for unfunded schemes.

92
Q

What are:

  • Pension credits.
  • Pension debits.

And how are they expressed for both DC and DB schemes?

A
  • Benefits awarded to ex-spouse.
  • Value deducted from member.
  • As a %.
  • As a number of ‘years’.
93
Q

Name 3 advantages of pension sharing to the member.

A
  • They potentially lose less value vs. offset or earmarking orders.
  • Immediate settlement & clean break.
  • No income tax implications.
94
Q

Name 3 advantages of pension sharing to the ex-spouse.

A
  • Benefits cannot be forfeited in event of either party’s death.
  • No risk on remarriage or cohabitation.
  • Immediate settlement & clean break.
95
Q

What was an ex-spouse able to do for on a pension sharing order prior to A-day?

A

Apply for an increase in their lifetime allowance to offset the pension credit.

96
Q

Name 2 aims of the Age discrimination directive?

A
  • To ensure the same scheme retirement ages irrespective of gender.
  • No discrimination on membership of grounds of age.
97
Q

What is direct discrimination?

A

When the trustees/managers or employer treat a worker less favourably than other workers on the grounds of that worker’s age.

98
Q

What is indirect discrimination?

A

When a rule, practise, action or decision, which is apparently age neutral, is in fact disadvantaging workers of a particular age.

99
Q

For either a direct or indirect discrimination to be objectively justified, what must be allowed?

A

It must allow the business to achieve a business need, e.g. meeting H&S requirements or economic efficiency.

100
Q

Under DB schemes, what paid periods of parental leave count as pensionable service?

A

Any of them.

101
Q

Under DC schemes, during paid periods of parental leave the employer must…

A

be based on salary before starting the parental leave.

102
Q

Under DC schemes, what are the requirements for employers and employees during periods of unpaid leave?

A

No requirements for employee and employer can cease to unless employment contract states otherwise.

103
Q

A creditor can only petition for a bankruptcy in what 2 circumstances?

A
  • if the debtor owes them £5,000 (can be pooled).
  • And if all possible means of getting the debt repaid have been exhausted.
104
Q

Once a bankruptcy order has been made, who is appointed and what will happen?

A
  • A Trustee in Bankruptcy (TIB).
  • Assets liquidised to provide cash.
105
Q

Name 2 main exclusions to what cannot be used to repay creditors.

A
  • Tools of the trade.
  • Clothing, bedding, furniture etc.
106
Q

The TIB can apply to the court to recover ‘excessive’ pension scheme contributions going back how far before the bankruptcy?

A

5 years.

107
Q

Under bankruptcy, what are income payment orders?

And what do they normally not include? [3]

A

Claims on any income the bankrupt does not need to meet the reasonable domestic needs of them and their family.

  • State pension.
  • NSP.
  • GMP.
108
Q

Under bankruptcy, what is the maximum length of an income payment order?

A

3 years.

109
Q

TIB only has access to a bankrupt’s pension when?

A

Once they have chosen to take an income.

110
Q

How long do bankruptcies usually last and name 2 consequences.

A
  • 12 months.
  • Cannot act as a company director.
  • Unable to receive credit over £500.

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