AF7

Question 1

What is an APTA

Answer 1

(FCA -Cobs section 19.1 - Conduct of business sourcebook) State that:

An APTA is an Appropriate Pension Transfer Analysis
and must include a caparison of the benefits likely to be paid from a DB scheme, with the benefits available
on a transfer to a Money Purchase Scheme.

Question 2

What are the 4 rules the FCA states must be included in the comparison of an APTA.

Answer 2

The FCA rules state that a comparison must:

1. Ensure their is sufficient information for the client to make an informed decision.
2. Draw the clients attention to the factors that do and dont support the firms advice.
3. Be presented to the client in good time and certainly no later than when the key features document is provided.
4. The firm takes reasonable steps to ensure the client understands the comparison provided and the advice given.

Question 3

What do the FCA rules state that the APTA comparison should do?

Answer 3

1. Take into account all of the clients circumstances.
2. Examine the benefits and options available under the ceding scheme. This includes showin the effect of replacing them with the benefits and options available under the proposed scheme.
3. Explain the assumptions on which the analysis is based and the rates of return required to match the benefits given up.
4. The rates of return used to illustrate potential benefits following a transfer must take into account where the funds will be invested.

Question 4

What is the final requirement for clients that wish to transfer and immediately crystallise their benefits before the schemes normal pension age?

Answer 4

In this instance
1. The comparison must also compare the benefits they will get from the new scheme with the benefits they would have received from the ceding scheme at the schemes normal pension age.

Question 5

A Transfer Value Analysis is no longer required but what does the FCA still need?

Answer 5

The APTA to still use a Transfer Value Comparator (TVC)

Question 6

What are the 5 FCA rules that an adviser must consider when making a personal recommendation

Answer 6

1. The clients intention to access flexible benefits.
2. The clients attitude to and the understanding of the risks involved in giving up safe guarded benefits for flexible benefits.
3. The clients attitude to and understanding of investment risk.
   4 The clients realistic retirement income needs. This must show how these income needs can be achieved taking into account any safeguarded benefits. This should also include the impact of a transfer on achieving these income needs including any trade offs.
4. Any alternative ways to achieving the clients objectives instead of the transfer.
   Thus you should be able to provide clear evidence to why a recommendation to transfer has been made.

Question 7

What do the FCA expect a suitability report to include?

Answer 7

1. A summary of the advantages and disadvantages of the personal recommendation made.
2. An anyalis of the financial implications if the recommendation is to opt. Out
3. A summary of any other material information.

Question 8

What is the three step process with dealing with an insistent client?

Answer 8

An adviser must:
1. Provide advice that is suitable to the individual client in line with the normal advice process.
2. Make clear the risks of the alternative course of action.
3. Make clear that their actions are against the advice of the firm.
The risks must be explained verbally to the client and also mentioned in the suitability report, that the client is acting giants the firms advice.

Question 9

What is Flexible Benfits?

Answer 9

This refers to Money Purchase arrangements and those with cash balance benefits.
I.e. funds held in a Money Purchase AVC fund.

Question 10

What is Safe Guarded Benefits?

Answer 10

This relates to all benefits that are not Money Purchase or Cash Balance Benefits.
I.e. Benefits held in a Defined Benefit Arrangement.

Question 11

What are Third Type Benefits?

Answer 11

These are not easily classified as flexible or safeguarded benefits its.

They could fall within the definition of both and could include hybrid schemes such as Define Benefit Schemes with a Money Purchase Underpin.
Or a Money Purchase Scheme with a Defined Benefit Underpin.

In this case you should treat benfits as Safe Guraded Benefits in other words air on the side of caution.

Question 12

Where benefits are regarded as Safe Guarded Benefits and the value of these benfits within a CETV is more than £30k and they wish to transfer these benefits to access them flexibly?

Answer 12

The member must receive appropriate independent advice. (Independent of the employer and trustees of the scheme)
The £30k limit is the amount of the Cash Equivalent Transfer Value or CETV before any reduction is made.
I.e to account for scheme underfunding

Question 13

What will the Trustees of a safe guarded benefits scheme, ask the members adviser to provide in writing?

Answer 13

1. Confirmation that the advice given is specific to the transaction proposed by the member. I.e that it covers the transfer of safe guarded benefits in order to access the funds flexibly.
2. The adviser has the required authorisations to provide advice on the transfer of the safe guarded benefits.
3. The FCA reference number of the business in which the adviser works.
4. The name of the member that received the advice and the name of the scheme to which the advice applies.