Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

R04 - Pensions > 6 - Defined Contribution > Flashcards

6 - Defined Contribution Flashcards

1
Q

What can a DC scheme may be?

A

Occupational scheme provided by an employer for benefits of the employees
Individual arrangements funded by the member

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a personal and stakeholder pension

A

Individual defined contribution arranagements - cont build up in fund (With profits/unit linked).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is a stakeholder pension

A

Low cost personal pension - subject to min standards

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a group personal and stakeholder pension

A

A series of individual defined contribution arrangements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is SIPP

A

Self-invested personal pension - individual defined contribution arrangement. With lots of choice.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a retirement annuity contract (RACs)

A

An individual defined contribution arranngement

Similar to personal pension plan, but no new ones since 01/07/1988

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is a executive pension plan

A

Set up as “one man” schemes aimed at director and senior employees.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a SSAS

A

Small self-administered scheme - aimed at company director and senior employees. Self- administered scheme has less 12 members (all trustees). Have special additional features for directors/senior employees and investment options.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are targeted money purchase schemes?

A

Hybrid schemes with both features of DB and DC schemes
Target level of benefit is determined

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is some differences between targeted money purchase schemes and DB

A

Employer has not promised targeted level of benefits - so can avoid benefits if assumptions not met
Only benefit promised is value of DC assets
Early levers of targeted money scheme only entitled to benefits from DC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is in-specie contributions

A

Form of assets (e.g. shares to a pension)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Where are the tax rules set out in, in-specie contributions?

A

Pensions Tax manual

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What must the contribution be in, in-specie contribution
What rules must be satisfied?

A

Monetary amount

  • Clear obligation on the contributing party
  • Separate agreement between scheme trustees and contributing party to sell an asset to scheme for market consdieration
  • Separate agreement under scheme trustees and contributing party agree cash contribution debt may be offset against consideration payable for asset
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What must be done if MV of asset is < contribution debt (in specie contribution)

A

balance must be paid in cash to qualify for tax relief

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How often must illustrations be sent to members of most DC schemes

A

Annually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What should Statutory money purchase illustrations include

A

Current accumulated fund at illustration debt
Accumulated future contributions
Accumulated charges
Accumulated risk benefit cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Who provides basis for SMPI illustrations

A

Financial Reporting Council

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What are some assumptions used for SMPI

A

Projections based on accumulation rate determined by provider
Projection converted into today term assuming inflation 2.5%
Future cont - 2.5%
Charges taken into account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

When is the rate of interest for annuity calculated for SMPI

A

15 feb

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Where can individuals view information about pensions inc state pensions online

A

Pension dashboard

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What do the new simpler annual statements include

5

A

Member and pension scheme details
How much money in pension plan
How much money you could have when you retire
What you could do to yourself more money
Find out about pension plan and how can you use money

5

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How often should simpler annual statements be reviewed

A

after 5 years and at least every 5 years after that

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is a trust-based scheme

A

Employer sponsered pension scheme, governed by trust deed and has board of trustees that oversees scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is contract-based scheme?

A

Outsourced by employer to third party provider which manages all aspect of scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is Defined benefit scheme set up as? Trust based or contract-based?

A

Trust based

26
Q

How can DC schemes be set up

A

Trust-based scheme : Occupational defined contribution pension scheme
Contract-based scheme (via group personal pension/stakeholder pension scheme)

27
Q

What are some differences between trust-based scheme and contract-based scheme

A

Trust-based:
Net-pay arrangement
Protection of trustees in selecting funds

Contract-based:
Contributions after tax
Less costly for employer

28
Q

What is TPR definition of a master trust scheme

A

Occupational pension scheme that
- Provides DC benefits
- Used by 2 or more employers
- Not used only by employers that are connected with each other
- Not a public service pension scheme

29
Q

What are some benefits/ drawbacks of Master trust schemes

A

Benefits:
Offers a governance function for employers with lower cost and simple
Members benefit from oversighht of investment
Only one group of professional advisors rather than a group for each division
One boad of trustees for whole scheme

Drawbacks:
If trustees are appointed by provider of master trust, employer unlikely to have trustee representation - disengaged from pension arrangements
Many trustee boards established by insurance companies have representation of insurer parent - conflict of interest

30
Q

How many criteria does master trust have from TPR and what are they

A

5

Fit and Proper
System and processes
Continuity and strategy
Scheme funder
Financial sustainability

31
Q

What framework insures tht mastertrusts demonstarte to employers scheme is maintained to high standard

A

Voluntary assurance framework

32
Q

What is the limit of charges for members funds in occupational DC schemes

A

0.75%

33
Q

What is the minimum pot size for charges for a flat fee to be charged on a occupation DC scheme

A

£100

34
Q

What are some charges relating to the cap on occupation DC scheme

A

IM fees
Ongoing cost (it and office)
cost of statements
payment to lawyers

35
Q

What are relevant multi-employer schemes

A

Those in which some or all of employers using scheme are not connected to each other

36
Q

What are some additional governance standards that relevant multi-employer schemes/master trust must follow

A

At leat three trustees/ three directors that are not affilated with any company that provides services to scheme
non-affiliated trustees must be appointed in open and transparent fashion
Trustees must have process in place to encourage scheme members to make their views known on matters that affect them

37
Q

What do the government require contract-based workplace pension schemes to have?

Hint committee

A

Indepedendent Governance Committees (IGC)

38
Q

What must IGC have?

A

Independent Governance committees must have
- Min 5 members
- Majority independent (applies to any workplace schemes/ not just automatic enrolment)

39
Q

What are the duties of IGC

4

A
  • Act solely in interest of relevant scheme members
  • Assess ongoing value for money of workplace personal pension schemes
  • Escalate concernss to FCA if dissatistfed with actions taken
  • publish annual report of findings
40
Q

What can providers who hae smaller and less complex pension schemes can establish

A

Governance Advisory Arrangement

41
Q

Who are the GAA and what do they do

A

Third party like IGC but cost less to operate, with the aim to ensure that relevant schemes deliver money to members.

42
Q

What type of drawdown must have IGC or GAA

A

non-advised (SIPP or other Personal pension policy) - contract-based personal pension agreement

43
Q

What are collective money purchase schemes?

A

Risk sharing/target pension plans.
Like DC pensions but assets are pooled between members rather than each member having money earmarked for their benefits

44
Q

What advantage can collective money pension schemes have compared to DC schemes

A

Advantages to cost for employers
Offer members better income
Provide members better idea of income

45
Q

What are some differences between SIPP and SSAS

7 (what type of scheme, regulated by etc.

A

SSAS:
Occupational Defined contribution scheme
Governed by trust deed and rules
Regulated by The Pension Regulator
Scheme can lend up to 50% of net to sponsoring employer
Investments chosen by trustees and benefits are not earmarked for individual members
Greater levels of admin
No need SMPI as all members are trustees

SIPP:
Individual defined contribution scheme
Set up as individual contract between member and pension provider
Regulated by FCA
Can not lend as no sponsoring employer
Investment chosen by individual and earmarked for individual basis
Less admin
Need SMPI annually

46
Q

When are some conditions a PCLS cannot be taken out

A

No scope in scheme rules for lump sum to be taken out
Member used up all PCLS allowance

47
Q

What are the methods to draw income out of pension

A

Scheme pension: pension paid directly out scheme assets/ paid by an insurance company by scheme admin
Lifetime annuity: paid by an insurance company member chose
Drawdown pension : member draws income from pension fund direcly

48
Q

What are the only methods to draw income under Ill health

A

Income
Income + PCLS
Small pots payment
UFPLS

49
Q

What is PCI

A

Pension contribution insurance - allows indiv/er contribution to continue due to ill health

50
Q

What type of pension schemes can PCI be used in

A

personal/stakeholder pension

51
Q

What is the general deferred period of PCI

who is responsible

A

26 WEEKS, individual/er is responsible for maintaining cont in meantime

52
Q

What is the limit to PCI generally

A

3600 gross

53
Q

Are PCI premiums elgible for tax relief

A

NO

54
Q

What is Income protection Insurance

A

AKA: Permanent health insurance

  • Purchased by company: pays income to employee due to ill heealth and counts towrads releavant UK earnings - allowing more than 3600 gross for tax relief
  • Purchased by individual - does not count as releavnt uk earnings, so no more than 3600 gross for tax relief
55
Q

What are the options for when indivduals leave occupational DC pension schemes

A

Early leaver
Refund of EE cont (if leavie with less than 30 days of service)
Preserved benefit
Transfer Value: - transfering to another pension (at least 3 months)

56
Q

How long do members have of a occupational defined contribution scheme have the right to transfer pension

A

Up to date of crystallisation of benefits even if they have reached scheme normal pension age

57
Q

What should an adviser take into account when determining whether a transfer is appropriate for client

A

Charges
Past performance
Analysis of existing with-profit funds
Transfer penalties
Guaranteed annuity rates
Life cover?

58
Q

What is the template that advisors must follow for DC -> personal pension or SIPP

A

Question: 4 sections
1. Infomation gathered about firm,client and pension arrangements
2. Customer needs analysis, objectivesm consolidation of pension
3. Unsuitable outcomes? if client has been switched to anything that is not good for them
4. Can identify where advice is suitable - advisor

Data:
1. Record information about ceding scheme
2. Section to record information relating to scheme
3. Section on fund specific data for receiving scheme

59
Q

What are the min standards of stakeholder pensions

A

Accept contributions at any frequency
Not set min permitted contribution at rate higher than £20
No place restrictions in which cont is piad
Accept transfer payments from another pension source
Not impose additional charges on transfers in/out scheme

60
Q

What are max charges of stakeholder scheme

A

Before 06/04/05 - 1% of fund
After 06/04/05 - 1.5% pa for first 10 years then 1%

61
Q

What is the charge for stakeholder pension to meet automatic enrolment

A

0.75%

R04 - Pensions (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions