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R04 - Pensions > 10 - Retirement planning considerations > Flashcards

10 - Retirement planning considerations Flashcards

1
Q

What are the two pension phases to consider

A

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

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2
Q

What are some factors affecting retirement planning needs

A

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

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3
Q

What is they key reletationship in pensions

A

Between rate of inflation and rate of return on investments

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4
Q

What are some key factors that affect ATR

A

Timescale
Wealth
Past experience
Other investments

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5
Q

What does ESG stand for

A

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

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6
Q

What are the 4 Asset classes

A

Cash
Fixed interest bonds
Equities
Properties

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7
Q

Why are cash deposits suitable as part of pension investment

A

Easily accessible
Avoids effects of reverse pound cost averaging

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8
Q

What are the main asset classes SSAS or SIPPs invest in

A

Collective investments

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9
Q

What is With profit funds

A

Added bonus add into fund

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10
Q

What is insurance company funds

A

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

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11
Q

What is lifestyle funds

A

Typically 75% gilts, 25% cash

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12
Q

When does lifestyling generally happen

A

5-10 years before retirement age

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13
Q

What are target date funds

A

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

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14
Q

What are the NEST timescales

A

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

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15
Q

What are the aims for foundation phase NEST timescale

A

Outperform inflation
promote confidence in saving
Minimise investment shocks

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16
Q

What are the aims for growth phase NEST timescale

A

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

17
Q

What are the aims for consolidation phase NEST timescale

A

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

18
Q

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

A

Funds moved to NEST POST retirement fund - temporary holding place

19
Q

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

A

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

20
Q

How many investment pathways are there in FCA what are they

A
  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
21
Q

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

A

If last advisor appointment more than 12 months before transaction

22
Q

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

A

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

23
Q

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

A

No

24
Q

What are the main controls cover in pensions

A

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

25
Q

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

A

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

26
Q

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

A

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

27
Q

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

A

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

28
Q

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

A

5 years

29
Q

How much can a SSas and SIPP borrow

A

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

30
Q

How to calculate net borrowing

A

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

31
Q

What is the safe withdrawl rate

A

4%

32
Q

What should stress testing include

A

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

33
Q

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

A

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

R04 - Pensions (10 decks)

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