C3 - Regulation

Question 1

Regulation of non-State provision

Answer 1

• Encourage appropriate levels and forms of provision
• Ensure adequate levels of provision
• Ensure secure provision

Question 2

Encouragement of provision by the state

Answer 2

• cash incentives
• tax incentives
• investment guarantees
• central admin resources
• simple to follow and open regulation
• quality certification

Question 3

Tax concessions on contributions

Answer 3

• by the employer deducted from profits before deduction of corporate tax
• by the employer not classed as taxable income for the employee
• by the employee deducted from taxable income
• subject to lower level of tax than profits or earned income

Question 4

Tax concessions on investments

Answer 4

• income (dividends, coupons, rents etc) not subject to tax
• growth (realised and unrealised gains) not subject to tax
• income or growth subject to lower levels of tax than other investments

Question 5

Tax concessions on benefits

Answer 5

• regular income receipts not subject to tax
• lump sum benefit receipts not subject to tax
• in kind goods or services not classed as taxable as earned income
• benefits subject to lower level of tax than earned income

Question 6

Limits on tax concessions

Answer 6

• annual level of contributions
• accumulated amount of investments
• level of benefits to be received
• value of benefits
• levels of other income or assets people may have

Question 7

Aim of limits on tax concessions

Answer 7

• limit cost of encouragement

- only encourage benefits that are deemed to be necessary

Question 8

State method of ensuring adequate levels of provisions

Answer 8

• compulsory contributions (by employee/employer/state)
• compulsory minimum benefit levels (employers or individuals)
• maximum administration charges by benefit providers
• safeguards on benefits when changing employment

Question 9

Financial regulations to ensure security of benefits

Answer 9

• require advanced funding
• require separation of pension fund from sponsors other assets
• require trustee control of funds
• require custodianship
• require authorisation of individuals or organisations that manage or invest funds
• restrict types of investment used for any funds
• restrict self investment
• require regular checks in the adequacy of separated funds and concentration/diversification
• audited valuations

Question 10

External sources of protection

Answer 10

• make outstanding benefit obligations on insolvency a high priority debt
• require financial guarantees from a parent company or shareholders
• require that insurance is held against inadequacy of funds on insolvency, negligence, fraud etc or charge a levy to provide compensation
• require letters of credit to be provided for schemes from banks
• require minimum credit ratings for organisations providing funding
• supervise the finances and marketing of commercial benefit providers
• place levy to provide compensation

Question 11

Administration actions to ensure benefit secuirty

Answer 11

• regular disclosure to potential recipients of the adequacy of funds and the ways in which those funds are managed and invested
• require or provide training or minimum training levels or qualifications for people who are responsible for benefit schemes
• require individuals involved in, or advising on, benefit administration provision or investment to report any bad practices to a state regulator
• require benefits to be provided for individuals who leave service or withdraw from scheme membership before retirement age
• require good record keeping and management