Chapter 4 - Pension Regulation Flashcards
Role of The Pensions Regulator
The Pensions Regulator (TPR) was established by the Pensions Act 2004 to support the strategic aims of the Department for Work and Pensions (DWP)
- make sure employers put their staff into a pension scheme and pay money into it (known as ‘automatic enrolment’);
- protect people’s savings in workplace pensions;
- improve the way that workplace pension schemes are run;
- reduce the risk of pension schemes ending up in the Pension Protection Fund (PPF); and
- make sure employers balance the needs of their defined benefit pension scheme with growing their business.
The Financial Ombudsman Service
independent, statutory dispute-resolution scheme. It operates under rules contained in the FCA Handbook (DISP 2 and DISP 3)
An eligible complainant is a:
* consumer;
* charity with an annual income of less than £6.5 million;
* trustee of a trust which has a net asset value of less than £5 million;
* micro-enterprise with fewer than ten employees and a turnover or balance sheet total of no more than €2m;
* borrower under a consumer buy-to-let (CBTL) credit agreement;
* small business (that does not meet the qualification to be a micro-enterprise) with an annual turnover of less than £6.5m and fewer than 50 employees or a balance sheet of less than £5m; and
* guarantor.
( This value is in euros as micro-enterprise is an EU defined term.)
a complaint can be sent to the FOS, it must be raised with the business the complainant feels is at fault. The business has eight weeks to offer the complainant a solution. If, after the business has investigated the complaint, the complainant does not feel the matter is resolved, they can then refer the matter to the FOS.
They must do so within:
* six months from the business sending the consumer a final response (which has to mention the six-month time limit); and
* six years from the event the consumer is complaining about (or, if later, three years from when the consumer knew, or could reasonably have known, they had cause to complain).
The Money and Pensions Service
In October 2016, the Government announced its intention to create a single organisation to deliver guidance on pensions, money and debt advice. This new public body was launched in early 2019 and as of June 2021, the consumer-facing service offered by The Money and Pensions Service (MaPS) was launched. This is known as MoneyHelper.
Pension Protection Fund (PPF)
The Pension Protection Fund (PPF), which came into effect from 6 April 2005, is an insurance scheme designed to protect members of defined benefit and hybrid schemes.
Funded by three levies: an administration levy, a fraud compensation levy and a pension protection levy.
it must not have commenced wind-up before 6 April 2005;
trustees remain in day-to-day control of the scheme
A Section 143 valuation is carried out to determine whether there are insufficient assets within the scheme
A PPF trivial commutation lump sum can, however, be paid in respect of PPF compensation once the scheme has been transferred
Financial Assistance Scheme (FAS)
The Financial Assistance Scheme (FAS) is designed to assist those who had lost pension benefits through company insolvency but are not covered by the PPF.
- they were a member of an underfunded defined benefit scheme that started to wind-up between 1 January 1997 and 5 April 2005;
- their scheme began to wind-up and did not have enough money to pay members’ benefits; or
Pension scams
practice of luring members of registered pension schemes to move their pension funds into unregistered schemes
Workplace pensions
- Eligible jobholders: employees that must be automatically enrolled.
- Non-eligible jobholders: employees who have the right to opt in to the workplace pension scheme.
- Entitled workers: employees who have the right to ask to join a pension scheme.
- Postponement: a delay of up to three months in the employer assessing a member of staff to determine what duties must be undertaken on their behalf with respect to auto-enrolment.
Qualifying earnings
Qualifying earnings (2022/23) are all earnings between £6,240 and £50,270
* Employer minimum contribution: 3%.
* Total minimum contribution: 8%.
Automatic re-enrolment
At least every three years, employers must automatically re-enrol all jobholders who had previously opted out of the scheme and who, at the date of the automatic re-enrolment, meet the criteria to be eligible jobholders
Pensions and divorce - Offsetting
Under offsetting the value of the pension is ‘offset’ against the other assets of the marriage. The ex-spouse would therefore receive a greater share of the balance of the assets in return for the loss of their ‘share’ of the member’s pension
Remember that the division of the assets is not always 50/50 and in some circumstances the pension may be ignored in the calculation altogether, e.g. if the husband and wife both have their own pension provision, or if the marriage was very short.
Pensions and divorce -Earmarking
Under an earmarking award, the member retains ‘ownership’ of the whole pension fund. The earmarking award simply allows the court to direct the pension provider to pay some of the benefits to the member’s ex-spouse.
The benefits earmarked for the ex-spouse do not become payable until the member secures their benefits.
Earmarking has no direct impact on either the member or the ex-spouse’s lifetime allowance
Pensions and divorce - Pension sharing
When pension benefits are shared, they are passed irrevocably to the ex-spouse. Therefore they are taxable as part of the ex-spouse’s income in retirement and the member is only taxed on the benefits they actually receive.
Pension Credit - Benefits awarded to the ex-spouse
Pension Debit - Value deducted from the member
Pension debits created on or after A-Day will not generally count towards the member’s lifetime allowance. However, where a member has primary protection, their primary protection factor will be reduced or even lost.
