10 - Retirement planning considerations

Question 1

What are the two pension phases to consider

Answer 1

Accumulation phase - where client is cont to pension
Decumulutation phase - client is taking money from pension

Question 2

What are some factors affecting retirement planning needs

Answer 2

Retirement date
How they intend to use money
Liabilities paid at retirement

Question 3

What is they key reletationship in pensions

Answer 3

Between rate of inflation and rate of return on investments

Question 4

What are some key factors that affect ATR

Answer 4

Timescale
Wealth
Past experience
Other investments

Question 5

What does ESG stand for

Answer 5

Environmental - How corporations interact with environment
Social - Rights of workforce
Governance - How corporations are governed, who owns them

Question 6

What are the 4 Asset classes

Answer 6

Cash
Fixed interest bonds
Equities
Properties

Question 7

Why are cash deposits suitable as part of pension investment

Answer 7

Easily accessible
Avoids effects of reverse pound cost averaging

Question 8

What are the main asset classes SSAS or SIPPs invest in

Answer 8

Collective investments

Question 9

What is With profit funds

Answer 9

Added bonus add into fund

Question 10

What is insurance company funds

Answer 10

Managed funds, equity funds, fixed interest funds and property funds

Question 11

What is lifestyle funds

Answer 11

Typically 75% gilts, 25% cash

Question 12

When does lifestyling generally happen

Answer 12

5-10 years before retirement age

Question 13

What are target date funds

Answer 13

Used by NEST as default fund for members
Select date for fund - risky intially and then move to less volatile

Question 14

What are the NEST timescales

Answer 14

Foundation - 40 years
Growth - 10-40 years
Consolidation - consolidation

Question 15

What are the aims for foundation phase NEST timescale

Answer 15

Outperform inflation
promote confidence in saving
Minimise investment shocks

Question 16

What are the aims for growth phase NEST timescale

Answer 16

Target investment returns plus 3%
maximise diversification
capture global growth
reduce impact of investment shocks

Question 17

What are the aims for consolidation phase NEST timescale

Answer 17

Integrate pension freedoms
de risk gradually to cpi + portfolio
reduce volatility

Question 18

What happens when Nest members hacve less than 10k in pot

Answer 18

Funds moved to NEST POST retirement fund - temporary holding place

Question 19

What happens when Nest members have more than 10k in pot

Answer 19

Funds moved to NEST guided retirement fund - providing real growth and stable and sustainable amount that can be withdrawn until 85

Question 20

How many investment pathways are there in FCA what are they

Answer 20

1. No plans to touch money 5 years
2. Plan to use money to set up guaranteed income within next 5 years
3. Plan to take money as long-term income within 5 years
4. I plan to take out all moneyt in 5 years

Question 21

When should a firm assume that an advisor had not been in contact

Answer 21

If last advisor appointment more than 12 months before transaction

Question 22

Where there is no advisor what should the firm option to member

Answer 22

Option 1. Use investment pathways
Option 2: Select investments without using investment pathways
Option 3: Remain invested in current fund

Question 23

Do SIPPS receive any tax advantage from investing in residential property/ wines/ cars

Answer 23

No

Question 24

What are the main controls cover in pensions

Answer 24

loans made by scheme to member/employer
Borrowings by scheme
investments in sponsoring employer
investment in taxable property
investment that benefits members

Question 25

What is the total shareholdings in a shareholding employer than an occupational scheme (ssas) can hold is limted to

Answer 25

Under 5% of scheme assets in any one sponsoring employer Under 20% of scheme assets where shareholdings relate to more than 1 sponsoring employer

Question 26

What are some rules in loans to sponsoring employers from occupational schemes

Answer 26

Loans from occupational scheme to sponsoring employer must not exceed 50% of net value of scheme assets at date the loan is granted

Question 27

What is the minimum interest rates of loans to sponsoring employers from occupational schemes

Answer 27

min ir of 1% over average base rate of six main clearing banks rounded up to higher of 0.25%

Question 28

What is the max time period of a loan to sponsoring employers from occupational schemes

Answer 28

5 years

Question 29

How much can a SSas and SIPP borrow

Answer 29

50% of net assets of scheme before loan. A fund with net assets of 200k has max borrowing of 100k

Question 30

How to calculate net borrowing

Answer 30

total assets of 200k existing borrowing of 30k actual assets in scheme is 170k max borrowing of scheme is 50% of 170k = 85k max additional borrowing = 85k - 30k = 55k

Question 31

What is the safe withdrawl rate

Answer 31

4%

Question 32

What should stress testing include

Answer 32

Sudden/permanent loss of assets increase income taken from portfolio need for ad hoc withdrwal future inflation higher living longer future returns lower than expected

Question 33

Over 20 years how does inlfation affect real income? 2% 3.5% 5%

Answer 33

2% - reduces real income by 1/3 3.5% - reduces real income by 1/2 5% reduces income by 2/3