4 - Pension Regulation Flashcards
What is the roles of Pension regulator
Automatic enrolment
Protect savings in pension
Improve the way that workplace pension schemes are ran
Reduce the risk of pension schemes ending in PPF
Make sure employers balance needs of DB scheme with growing business
What is TPR principal aim
To prevent problems from developing, it is risk based and proportionate
How many code of practice does TPR have
16
What are the three broad categories TPR have?
- Gathering information
- Regulation and enforcement action
- Acting against avoidance
What type of information does TPR gather?
Does it share its information with others?
Scheme returns
Funding documents
Employer declaration that comply with workplace pension duty
Yes
HMRC, FCA, PPF, DWP
3
What are the range of options that TPR can use to ensure that rules are followed “what can they do to prtoection security of members benefits”
5
Issue improvement notice
Recover unpaid contribution from employer
Prohibit individuals if does not consider fit for pension scheme trustee
issue fines
How can the TPR act out against avoidance? What do they issue?
Contribution notice:
Where there is delibarate attempt to avoid a statutory debt - notice directs those to pay up debt in full.
TPR can start procedure up to six years after an act/failure took place
Financial support direction:
TPR concludes that sponsoring employer is either a service company or is insufficiently resourced at a time chosen by TPR. TPR can start the procedure to seek financial support up to two years after relvant time
2
What is a clearance procedure
Available to employers who wish to confirm that a certain transaction will not be subject to TPR anti-avoidance powers
What ACT gave the TPR powers to (de)authorise master trusts
Pension scheme act 2017
What is an eligible complainant in FOS
7
Consumer
Charity <6.5m annual income
Trustee of trust - NAV <5mill
Micro-enterprise <10 employees < 2mil euros
Borrower under CBTL (Consumer buy to let)
Small business <50 employees < 6.5mil <5m balance sheet
guarantor
What are some examples the FOS would deal with complaints
3
Wrongly advised to transfer pension
Advised to take unsuitable pension
Excessive delay in setting up annuity - financial loss
3
What can’t the FOS deal with?
Who are they dealt with then?
2
Occupational scheme linked to individual employment
Personal pension set up by employer (complaint about employer/admin of scheme
They are dealt with pension ombudsman
How long do firms have to resolve complaint before FOS are involved
8 weeks
When should the complaint to FOS be handed in
Within
Six months from firm given consumer final response (firm has to mention six month time limit and
Six years from event the consumer is complaining about (olr if later, three years from when consumer knew)
What can the FOS give when upholding complaint
Money award
Award for distress and inconvenience
Interest award
Cost award
Directions
5
What is the limit of award after 1 April 2023
£415k
How are interest awrad paid out from FOS
3
Part of Money award
On top of financial award
After financial award has been calculated
When should indviduals go to Pension ombudsman service?
If a pension scheme
* Take too long to do something without good reason
* Failing to do something it should’ve
* Not following its own rules/law
* breaking a promise
* giving incorrect/misleading info
* Not making a decision in right way
6
What can’t the POS investigate?
State pension
Tracing lost pension
sales/marketing of pension
decision made by tribunal, court or other ombudsman
4
What is the limit of Pension ombudsman complaint?
Limitless
Who do the pension ombudsman service only investigate complains from
current/former members of pension scheme
widow/ civil partner/ dependent of member who dead
pension credit
someone nominated to take complaint to POS
4
What is Moneyhelper
Free service by money and pension service sponsored by DWP
- Guidance to make effective financial decisions
What is PPF
Insurance scheme designed to protect members of defined benefit and hybrid schemes
Who is PPF ran by
PPF board, independent of pension regulator
How is PPF funded?
3
Three levies
Admin levy
Fraud compensation
Pension protection levy:
* Scheme based
* Risky based
Where might a PPF may pay compensation
2
An employer with UK based DB/ Hybrid occupational pension scheme becomes insolvent and scheme is underfunded
Funds of a DB or hybrid scheme been misappropriated through fraud
What are some conditions for PPF to take responsibility for scheme?
3
Must not be DC scheme
Must not commenced wind up before 06/04/2005
No chance it can be rescued
What happens if a prescribed insolvency event occurs.
How long does PPF take to complete this within?
PPF completes within 2 years.
The assessment period: Trustees remain in control.
No new members
No further benefits
No transfer values paid
Benefit can be paid on level of PPF compensation
PPF will review any moral hsazards
PPF will review any hazards within 3 years prior - rule changes which may lead to increase PPF compensation
6
What are some cases that trustees pay out transfer values when in an assessment period (insolvency)
Requested and accepted transfer value before assessment date
Has designated scheme willing to accept transfer value
Trustees can pay out if they are satisfied that they can still meet objective of ensuring protected liabilities do not exceed assets
What valuation is carried out to determine whether there are insufficient assets within a scheme
Section 143 valuation
PPF compensation:
Survivor benefit for spouse/partner benefit
50%
PPF compensation:
Qualifying children (spouse paid/spouse not paid)
Spouse paid
25% (1), increasing to max of 50% (more than 1)
Spouse not paid
50% (1) increasing to max of 100% (more than 1)
What is definition of qualifying child
Under 18
18-23 (in qualifying education/qualifying disability)
When can a PPF trivial commutation lump sum be paid out
Member reaches
Normal min pension age
Under 75
Has max 30k benefits
What is the window of payment for trivial commutation lump sum
12
Who are the FAS
Financial assistance scheme assists those who had lost pension benefits through company insolvency not covered by PPF
How much do FAS pay of pension
90% - cap is £41,888 a year between 01/04/2023 - 31/03/2024
What is the FCA website helping individuals to not get scammed
Scamsmart
What is postponement? - when speaking about workers
A delay up to 1 day to three months in employer assessing a member of staff to determine what duties must be undertaken ein lreation to auto-enrolment
What are the thresholds for annual earnings for automatic enrolment?
16-21
Non eligible jobholders: £6240+
<£6240 Entitled worker
22-SPA
Eligible job holder: 10k+
6240-10k: non eligible jobholder
<6240 entitled worker
SP Age: 74
Non-eligible job holder, has a right to opt in over 10k
What is the date the assessment carried out after postponement called
Deferral date
How long is the joining period for automatic enrolment
6 weeks from eligible jobholder automatic enrolment date
What are the steps for automatic enrolment
Provide information on the eligbile jobholder to the pension scheme
Give enrolment information to eligible jobholder
Make arrangements to achieve active membership
Who is responsible to join a pension scheme (automatic enrolment)
Employer
What are the two options available to an employer for min contributions
Employer min: 3%
Total min: 8%
Base contirbutions on qualifying earnings
Use an alternative defintiion (such as basic pay) and pay cont on pound zero
How many different sets of minimum contributions are there?
3
Set 1: min cont (employer +ee) - 9% of pensionable pay
Employer cont must be at least 4% of pensionable pay
Set 2: min cont (er+ee) - 8% of pensionable pay
ee cont must be at least 3% of pensionable pay
defintion of pensionable pay must include at least 85% earnings
set 3: min cont (ee+er) - 7% earnings
Employer cont must be at least 3% earnings
All earnings must be pensionable
What is automatic enrolment
Every 3 years automatically enrol all job holders who opten out of scheme
What is The Peoples pension?
Run by B&CE - provides pension for construction industry
What are the charges of peoples pension
0.5% and annual charge of £2.50
What are the charges for NEST?
0.3% + 1.8% on contributions made
How much is the rebate of The Peoples pension mgm charge
0.1% - 0.3%
3k-10k - 0.1%
10k-25k - 0.2%
25k-50k - 0.25%
50k + - 0.3%
What are the three ways to claim pension rights as a result of a divorce
Offsetting
Earmarking
Pension sharing
What is offsetting in regards to divorce pension rights
Pension benefits are valued as immediate assets (lump sum value in todays term) - then can offset against other assets of marriage.
DB scheme:
CETV (Cash equivalent transfer value)
Following are taken into account
- Ex spouse iwll no longer gain benefit from pension/tax free
- Ex spouse will no longer receive spouse pension
- Loss of death in service benefit
DC Scheme:
- Percentage/proportionate division of fund value taken into account
- Loss of pension benefit
-Loss of spouse pension
Loss of death in service lump sum
What is earmarking in relation to divorce
Ex spouse is entitled to some of pension benefits when taken.
Either as
Earmarked periodic payment order:
Payment to ex spouse will start when member takes own benefit
Earmarked lump-sum order
Payment made when member comes to draw retirement benefit
Is Earmarking orders set out in percentage terms?
Yes
Adv/Disadv of earmarking
Adv:
If ex-spouse remarries - no need to give them periodic payment (maybe lump sum)
Member controls investment
No money changes hand straight away
Disadv:
Not payable until member secures benefits
Member can defer benefits
No control over pension (ex-spouse)
What is pension sharing?
Divides scheme member pension rights at divorce
What pension rights cannot be shared
4
New state pension
Basic state pension
State graduated retirement benefits
widow(er) pension in payment
What pension rights can be shared?
Protected payments
SERPS and S2-
Occupational schemes
Registered individ schemes (personal pension, stakeholder, retirement contracts)
Statuory schemes
What happens if ex-spouse dies in pension share?
It forms a part of their estate
What must be recommended to ex spouse in DB schemes (split)
Transfer value
How are unfunded schemes operate in relation to a split pension as a result of divorce
Opposite of DB scheme
Transfer value no
Membership Yes
