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RO4 Keys > 3 - Pension Law & Regulation > Flashcards

3 - Pension Law & Regulation Flashcards

1
Q

Scheme administrator within an RPS

  • must replace within how many days?
  • rules (3)
  • do you need to register the admin. with a regulator?
A

Carries out admin. duties

In order to be classified as an RPS must have a scheme administrator

Must replace within 30days if lose scheme administrator and deregistration charge of 40% would then applicable

Rules:
- Must be UK resi.
- must be appointed
- complete online declaration

Scheme administrator can delegate duties but it ultimately responsible

Scheme adminstrator is known to HMRC but not registered with FCA or The Pension Regulator

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2
Q

Member requirements of an RPS (3)

  • If flexibly accessed DC pension funds, then must notify scheme administrator within how many days?
  • what must you do if a member of any other scheme?
  • what is used for paying taxes?
A

If flexibly accessed DC pension funds, then must notify scheme administrator within 91 days of accessing funds

If a member of any other pension schemes must notify scheme admin.

Uses self assessment for taxes

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3
Q

RPS scheme trustees

  • Non professional trustees have how long to get upto speed?
  • Must report contribution payment delays of more than 30 days to who?
A

Required when pension in trust

Must be:
- age 18+
- have mental capacity
- not be disqualified as per pension act 1995 or The Pensions Regulator

Non-Professional trustees have 6months to get upto speed, post appointment

Duties:
- Must report contribution payment delays of more than 30 days to The Pensions Register
- Obtain accounts
- Draw-up statement of investment principles
- Establish a recovery plan

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4
Q

What would a trustee of a DB scheme have to do that they wouldn’t in a DC scheme?

A

Draw up scheme documents such as statement of investing and funding principles and must have a recovery plan of how to do this.

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5
Q

Scheme actuary within an RPS are used for what scheme? And how often do they check assets are sufficient?

A

Must ensure scheme assets are checked atleast every 3yrs to ensure there is no shortfall

Mainly used for DB scheme than DC

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6
Q

Can the same person act as a trustee and an actuary for an RPS?

A

No, trustees responsible for appointment of actuary

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7
Q

Scheme auditor

A

Checks all documents completed in line with rules and legislation via ‘sign off’. Duty to report breaches of the law to The Pension Regulator.

Auditor must hold practicing certificate

More for DB scheme than DC

On receipt of documents must accept appointment within 30 days

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8
Q

Investment manager within RPS

A

manages pension on behalf of scheme and reclaims taxes on investments

Comes under SM&CR rules as a control function

Authorised and regulated by the FCA

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9
Q

Pension dashboard

A

Gov. initiative for people to be able to access all of their pensions online, securely in one place (including state pension)

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10
Q

Money & Pensions Service (MAPS)

A

Helps people manage their pensions and offers informstion(not advice)

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11
Q

Pension providers body

A

Responsible for ensuring providers and scheme have people’s data accurate and upto date

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12
Q

FOS

A

Help customers resolve complaints against regulated financial businesses. Dealing with complaints against personal pensions and dashboard providers

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13
Q

Pension ombudsman

A

Help customers resolve complaints against occupational pension schemes and dashboard providers.

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14
Q

What is scheme rules override?

A

Some RPS do not allow payments under pension freedom options. This scheme overrides this to allow these payments without scheme rules being amended and having tax implications.

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15
Q

How to deal with an RPS in event of divorce - Offsetting (1 of 3 ways)

A

Offsetting - where member gets to keep pension in full but ex-spouse gets greater share of other assets in leiu and value RPS according to:

How to value for DC:
- fund value less any charges

How to value for DB:
1. Calculate current value
2. Re-value according to scheme normal retirement age
3. Calcite lump sum to provide future pension (using annuity rate assumptions)
4. Discount future lump sum back into todays value (using discounting rates)

Funds taxable to member in full

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16
Q

How to deal with an RPS in event of divorce - earmarking (2 of 3 ways)

A

Allows ex-spouse to access share % of members PCLS when crystallised either paid periodically or in lump sum

How to value for DC:
- percentage owed is based on % on fund value at date of divorce, plus further fund growth

How to value for DB:
- Entitiled to % of undetermined amount at normal retirement age

Benefit to be received /payments to ex-spouse will stop should either die or ex-spouse remarries

LTA tested and taxable to member only, never on ex-spouse

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17
Q

How to deal with an RPS in event of divorce - pension sharing (3 of 3 ways)

A

Split % of pension at point of divorce

Ex-spouse can either keep their share of funds in members scheme or transfer the funds to their own scheme

Split % received by ex-spouse is taxable to ex-spouse not the member

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18
Q

Age discrimination directive purpose and what was effected?

A

People treated equally regardless of employment, age, etc.

Only thing effected by this was employer contributions to any scheme

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19
Q

When is discrimination based upon age acceptable?

A
  • health and safety
  • economic efficiency
  • decreasing employee turnover
  • increasing employee loyalty and retention
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20
Q

Direct and indirect discrimination

A

Direct - employer, trustees or investment manager treats an individual less favourably based upon age

Indirect - A rule, practice or decision is subliminally discriminatory based on age

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21
Q

Financial services and markets act (2000) established what?

A

Pension is not classified as an investment and therefore not regulated

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22
Q

Is a pension regulated?

A

No but investment management is which means:

  • fund managers are regulated by FCA
  • registered under SM&CR or as approved person
  • trustees do not have to be authorised by regulator
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23
Q

EU law for pensions key aims (3)

A
  • protect employees when transferring pensions against insolvency
  • promote cross border harmony
  • promote free employee movement between pension funds
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24
Q

EU legislation that impacted UK the most:

  • Equalisation
  • The pensions directive
A
  • Equalisation - Ensuring no gender discrimination
  • The pensions directive - Ensure freedoms with cross border schemes
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25
Q

Can you contribute to UK scheme if in EU and vice-versa if employee/employer?

A

Yes

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26
Q

Debtor and creditor

A

Debtor - person in debt

Creditor - person money owed to

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27
Q

Min. amount of debt for valid bankruptcy?

A

£5k
(Half number of letters in bankrupt)

28
Q

What is a income payment order when a person is made bankrupt? And what is max length order can last?

A

Persons pension income that isn’t required to meets costs of basic needs can be used to repay creditors

Max. length of 3yrs and reviews carried out if goes over 1yr as bankruptcy lasts for 12months typically.

29
Q

How are pension benefits treated by a trustee in bankruptcy for both crsytalised and Uncrystalised for the below schemes?

  • Non-contracted out benefits
  • GMP
  • Post 1997 contracted out rights
  • Contracted in schemes
  • Annuities/Section 32 BOB
  • Defferred benefits
  • State benefits
A

Uncrystalised:
- All protected by WRPA, except state benefits which do not form part of the estate

Crystallised:
- All can be accessed through an income payment order (Even state benefits) except GMP which cannot access

30
Q

If pension assets have been moved to protect from bankruptcy claim can the funds then be accessed by the court? And how long can recover from?

A

Yes

5yrs (easy to remember as min. value is £5k)

31
Q

If pension contributions have increased to stop them being accessed from bankruptcy claim can they be accessed by the court? And how long can recover payments from?

A

Yes, with reasonable evidence.

5yrs

32
Q

The pension regulator (TPR)

A

Regulates workplace pension schemes is a pro-active regulator that uses a risk based approach:

  • investigates schemes by using a reporting system
  • put things right
  • act against schemes avoiding their pension obligations
33
Q

What is issued by The Pension Regulator?

  • freezing order
  • contribution notice
  • financial support directions
A

FO - When a scheme wins-up is on the cards issues the order and activity stops temporarily whilst TPR investigates

CN - employer must pay scheme debt to the scheme they have been trying to avoid

FSD - support package for schemes short on resources or funds

34
Q

Who has authority to authorise and deauthorise a master trust?

A

The Pension Regulator

35
Q

Master Trust and their benefits (2)

A

Multi-employer occupational scheme where each employee has their own division within the arrangement

+ Cheaper
+ Simpler

36
Q

The Pension Advisory Service and who is it funded by?

A

Provide information and guidance (not advice) on all forms on pensions. No longer deals with complaints. Funded by DWP via provision grants

37
Q

Money and Pensions Service (MaPS)

A

Offers information and guidance on debt, money, pensions and consumer protection.

38
Q

The Pensions Ombudsman

A

Deals with complaints relating to the administration and running of any pension related scheme except state benefits, providing schemes complaints procedure has been followed.

Does not deal with advice side as this would be FOS

39
Q

Financial Ombudsman

A

An independent body that deals with complaints relating to finance, providing schemes complaints procedure has been followed.

40
Q

What are compensation and time frame limits of FOS?

A
  • 6months from firms final response
  • 6yrs from event being complained about
  • 3yrs from when should be reasonably aware could make complaint

Max. compensation of £415,000 plus interest and costs

41
Q

Pension compensation scheme:

  • Pension protection fund
  • Financial assistance scheme
  • Fraud compensation fund
A
  • Pension protection fund - Pay compensation to employees in a DB RPS scheme where an employer is made insolvent and has insufficient assets to cover pension. Funds raised through levies or DB scheme assets.
  • Financial assistance scheme - Was the Pension protection fund prior to PPF being established but has one level of 90% compensation and limit of £41,888 annually
  • Fraud compensation fund - For individuals who have fallen foul to fraud or dishonesty where employer has suffered insolvency and funded through levies
42
Q

What is moral hazard?

A

When an employer provides additional benefits to some employees knowing the PPF will cover the remainder

43
Q

Section 143 valuation of a pensions scheme

A

Valuation method that calculates the assets that would be required if each members assets by an insurance company, within the PPF compensation limits

44
Q

Compensation limits of Pension Protection Fund (PPF)

A

Compensation limits:

100% accrued benefits
- When employer made insolvent when retiring at scheme NPA
- Retire early due to ill health
- Receive a dependent pension

90% accrued benefits
- When employer made insolvent when retiring before scheme NPA
- Deferred members under scheme NPA
- Active scheme members

50% accrued benefits
- Survivors pension for if member has died can be for partner (doesn’t have to be married) or qualifying dependent

45
Q

Qualifying dependent

A

Age under 18

between 18-23 and in qualifying education/disability

46
Q

Pension liberation schemes

A

Schemes tempting people to invest in unauthorised pension schemes which can lead to tax penalties

47
Q

Pension scams industry group

Scam Smart

A

PSIG - Voluntary group set-up to combat pension scams

SS - FCA website set-up to help people avoid pension liberations

48
Q

Is cold calling in relation to pensions illegal?

A

Yes, but not through social media, friends, etc.

49
Q

Worker categories for a pension (3)

Auto enrolment
Opting-In
Right to join

A

Auto enrolment
- eligible job holder
- employees age from 22 to SPA earning over £10k

Opting-in
- Non eligible job holders
- not auto enrolled but have right to opt-in
- Age between 16 and 24 or SPA and 74 earning over £10k

Right to join
- Entitled worker
- entitled workers who can choose to join the scheme but are not auto enrolled or opted-in
- age between 16 and 74 earning less than LEL of £6,396

50
Q

What if you opt out of auto-enrolment employee scheme?

A

Will be auto enrolled again every 3yrs

51
Q

How long do employers have to provide auto enrolment information for pension after enrolment?

A

6 weeks to provide info. after enrolment date

52
Q

What employee has no right to employer contributions towards pension scheme?

A

Entitled worker (right to to join pension scheme)

53
Q

Gov. pension scheme

A

National Employment Savings Trust (NEST)

54
Q

If change employment or go self employed can you still contribute to NEST pension?

A

Yes

55
Q

Charges for NEST pension:

Annual management charge
Contributions charge
Transfer fee

A

Annual management charge - 0.3%

Contributions charge - 1.8%

Transfer fee - £0 but must be a min. value of £50

56
Q

What does default NEST pension do?

A

Higher risk at the start then switches to bonds and cash when close to retirement

57
Q

NOW pension

A

Low cost alternative to NEST pension which one investment element made of 2 components:

Diversified growth - targeting long term growth

Countdown fund - protecting pension savings

58
Q

NOW pension charges:

Annual management charge

Administration charge

Transfer fee

A

Annual management charge - 0.3%

Administration charge - £21 per yr

Transfer fee - £0

59
Q

The People’s pension

A

Non-profit pension scheme so all profits go to members

60
Q

The People’s Pension charges:

Annual management charge

Administration charge

Transfer fee

A

Annual management charge - 0.5%

Administration charge - £2.50 per yr

Transfer fee - £0

61
Q

What are qualifying band earning? And how do you calculate this?

A

Earnings between LEL of £6,396 & UEL of £50,270

Earnings of below £50,270 or £50,270 of above - £6,396 = qualifying earnings

62
Q

Employers must ensure auto-enrolment scheme does not (2)

A

Contain barriers to enrolment

Require information to become or remain a member from employee or employer

63
Q

How does an eligible job holder opt out?

A

Complete an opt out notice and give to employer to provide to scheme. This must be done within 1 month of:

  • Jobholder became an active member
  • Auto-enrolment information was received from employer
  • If gave invalid notice then employer must inform the employee why it’s invalid and give a 6 week extension
64
Q

When must pension contributions be refunded by once received opt out notice of auto-enrolment?

A

Either:

  • within 1 month of receiving notice

Or

  • by the last day of the second pay day following date of receiving notice
65
Q

What information must an employer send to TPR regarding their pension scheme?

A

Complete a form regarding how their compliance works for their auto-enrolment pension scheme

66
Q

All records must be kept for how many years? Other than 1 exclusion which is?

A

6yrs minimum

4yrs minimum - Exclusion, which is records for opt out

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