10 - Retirement planning considerations Flashcards
What are the two pension phases to consider
Accumulation phase - where client is cont to pension
Decumulutation phase - client is taking money from pension
What are some factors affecting retirement planning needs
Retirement date
How they intend to use money
Liabilities paid at retirement
What is they key reletationship in pensions
Between rate of inflation and rate of return on investments
What are some key factors that affect ATR
Timescale
Wealth
Past experience
Other investments
What does ESG stand for
Environmental - How corporations interact with environment
Social - Rights of workforce
Governance - How corporations are governed, who owns them
What are the 4 Asset classes
Cash
Fixed interest bonds
Equities
Properties
Why are cash deposits suitable as part of pension investment
Easily accessible
Avoids effects of reverse pound cost averaging
What are the main asset classes SSAS or SIPPs invest in
Collective investments
What is With profit funds
Added bonus add into fund
What is insurance company funds
Managed funds, equity funds, fixed interest funds and property funds
What is lifestyle funds
Typically 75% gilts, 25% cash
When does lifestyling generally happen
5-10 years before retirement age
What are target date funds
Used by NEST as default fund for members
Select date for fund - risky intially and then move to less volatile
What are the NEST timescales
Foundation - 40 years
Growth - 10-40 years
Consolidation - consolidation
What are the aims for foundation phase NEST timescale
Outperform inflation
promote confidence in saving
Minimise investment shocks
What are the aims for growth phase NEST timescale
Target investment returns plus 3%
maximise diversification
capture global growth
reduce impact of investment shocks
What are the aims for consolidation phase NEST timescale
Integrate pension freedoms
de risk gradually to cpi + portfolio
reduce volatility
What happens when Nest members hacve less than 10k in pot
Funds moved to NEST POST retirement fund - temporary holding place
What happens when Nest members have more than 10k in pot
Funds moved to NEST guided retirement fund - providing real growth and stable and sustainable amount that can be withdrawn until 85
How many investment pathways are there in FCA what are they
- No plans to touch money 5 years
- Plan to use money to set up guaranteed income within next 5 years
- Plan to take money as long-term income within 5 years
- I plan to take out all moneyt in 5 years
When should a firm assume that an advisor had not been in contact
If last advisor appointment more than 12 months before transaction
Where there is no advisor what should the firm option to member
Option 1. Use investment pathways
Option 2: Select investments without using investment pathways
Option 3: Remain invested in current fund
Do SIPPS receive any tax advantage from investing in residential property/ wines/ cars
No
What are the main controls cover in pensions
loans made by scheme to member/employer
Borrowings by scheme
investments in sponsoring employer
investment in taxable property
investment that benefits members
What is the total shareholdings in a shareholding employer than an occupational scheme (ssas) can hold is limted to
Under 5% of scheme assets in any one sponsoring employer
Under 20% of scheme assets where shareholdings relate to more than 1 sponsoring employer
What are some rules in loans to sponsoring employers from occupational schemes
Loans from occupational scheme to sponsoring employer must not exceed 50% of net value of scheme assets at date the loan is granted
What is the minimum interest rates of loans to sponsoring employers from occupational schemes
min ir of 1% over average base rate of six main clearing banks rounded up to higher of 0.25%
What is the max time period of a loan to sponsoring employers from occupational schemes
5 years
How much can a SSas and SIPP borrow
50% of net assets of scheme before loan.
A fund with net assets of 200k has max borrowing of 100k
How to calculate net borrowing
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
What is the safe withdrawl rate
4%
What should stress testing include
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
Over 20 years how does inlfation affect real income?
2%
3.5%
5%
2% - reduces real income by 1/3
3.5% - reduces real income by 1/2
5% reduces income by 2/3
