Chapter 4 - Pensions regulation Flashcards
Pam was a member of her previous employer’s defined benefit scheme between 1992 and 2010. The scheme has recently entered the Pension Protection Fund and Pam should be aware that her deferred benefits will now be revalued in line with increases in CPI to a maximum of:
a.5% p.a. for all service after 5 April 1997 with no revaluation for benefits accrued prior to this date.
b.5% p.a. for service prior to 6 April 2005 and CPI to a maximum of 2.5% p.a. for benefits accrued after this date.
c.5% p.a. for service prior to 6 April 2009 and CPI to a maximum of 2.5% p.a. for benefits accrued after this date.
d.2.5% p.a. for all service after 5 April 1997 with no revaluation for benefits accrued prior to this date.
c.5% p.a. for service prior to 6 April 2009 and CPI to a maximum of 2.5% p.a. for benefits accrued after this date.
Revaluing benefits of deferred members
For service before 6 April 2009 - Increased in line with CPI to a maximum of 5%.
For service after 5 April 2009 - Increased each year in line with CPI to a maximum of 2.5%.
Increases in benefits in payment
For service before 6 April 1997 - No increase
For service after 5 April 1997 - Increased in line with CPI to a maximum of 2.5%.
Chapter reference 4B1B
Which pension CANNOT be made subject to a pension sharing order?
a.State Earnings Related Pension Scheme.
b.New State pension.
c.State second pension.
d.Public sector statutory scheme.
b.New State pension.
The following pension rights cannot be shared:
* new State Pension (also known as the single-tier State Pension);
* Basic State Pension;
* State Graduated Retirement Benefits; and
* a widow(er)s pension in payment.
The following pension rights can be shared:
* protected payments paid in addition to an individual’s entitlement to the new
State Pension;
* SERPS and S2P;
* occupational schemes, including AVCs;
* registered individual schemes (i.e. personal pensions, stakeholder pensions, retirement
annuity contracts and section 32 policies); and
* statutory schemes (i.e. public sector).
Chapter reference 4D3
If a jobholder wishes to opt out of a qualifying workplace pension scheme they must do so by giving an opt-out notice to the employer within the opt-out period. How long is the opt-out period?
a.Six weeks.
b.One month.
c.Two weeks.
d.Three months.
b.One month.
The opt-out notice must be submitted within the opt-out period. This is a period of one month and starts from the later of the date:
- active membership of the scheme was achieved; or
- the worker received the employer’s letter containing the enrolment information
Chapter reference 4C5
In May 1990 a ruling made by the European Court of Justice resulted in legislation being written into the Pensions Act 1995. What impact did this ruling and the subsequent legislation have on UK pension schemes?
a.It ensured that pension schemes cannot discriminate against members or prospective members of a pension scheme on the basis of age.
b.It ensured that discrimination [direct or indirect] can only be lawful if one of the specific exemptions apply or if it can be objectively justified.
c.It introduced protection of employee pension benefits where employees are transferred from one business to another or when their employer becomes insolvent.
Chapter reference 4E2A
d.It brought the equal treatment of men and women with regard to occupational pension schemes into UK law.
d.It brought the equal treatment of men and women with regard to occupational pension schemes into UK law.
The Pensions Act 1995 brought the equal treatment of men and women with regard to occupational pension schemes into UK law. Prior to this legislation it was common for men and women to have different retirement ages,
Chapter reference 4E2A
A member of a defined benefit pension scheme takes a period of unpaid paternity leave. Assuming his employer does the minimum required under legislation the period of unpaid leave will be:
Question 5Select one:
a.ignored when benefits are calculated, but the employment before and after the unpaid leave will be treated as continuous service.
b.included as continuous service when benefits are calculated.
c.included when benefits are calculated, but the employment after return from the unpaid leave will be treated as a separate period of service.
d.ignored when benefits are calculated, and the employment before and after will be treated as separate periods of service.
a.ignored when benefits are calculated, but the employment before and after the unpaid leave will be treated as continuous service.
Defined benefit schemes
Any paid period of parental leave counts as pensionable service, so:
- benefits must continue to accrue based on the pensionable earnings that the employee
received before they commenced their period of parental leave; and - because employee contributions are based on the actual pay received, the employer
must pick up any shortfall arising from the reduced employee contributions.
Any unpaid period of parental leave does not have to count towards pensionable service
Chapter reference 4E3A
Which of the following is NOT included when calculating a jobholder’s qualifying earnings?
a.P11D benefits.
b.Commission.
c.Statutory sick pay.
Chapter reference 4C3A
d.Overtime.
a.P11D benefits.
Qualifying earnings (2024/25) are all earnings between £6,240 and £50,270 received by the
worker as:
* salary or wages;
* overtime;
* commission;
* bonuses; and
* Statutory Sick Pay, Mat/Pat Pay
You will notice that P11D benefits are not included in the definition of qualifying earnings.
Chapter reference 4C3A
An earmarked periodic payment was agreed from Jill’s pension in favour of Jeff as part of their divorce settlement. If Jill were to die in payment, then the periodic payment will:
a.be commuted to a lump sum.
Chapter reference 4D2
b.continue, but reduce by 50%.
c.be unaffected.
d.cease.
d.cease.
The ex-spouse can have benefits earmarked in the member’s pension scheme allowing them to receive income and/or lump-sum payments in the future. This may be on either the retirement or the death of the member.
Member dies - Earmarked periodic payment order ends and ex-spouse loses the benefit,
whether death occurs before or after payment starts.
Chapter reference 4D2
What is the maximum period of postponement a company can apply when assessing a worker for auto-enrolment?
a.Two months.
b.One month.
c.Six months.
d.Three months.
Chapter reference 4C1A
d.Three months.
Choosing postponement allows an employer to defer the date on which it assesses a worker,
as follows:
- the period of postponement can be between one day and three calendar months;
- the date the assessment is carried out after the postponement is known as the deferral
date; and - an employer can choose to use postponement in respect of one worker, some workers or
its entire workforce.
Chapter reference 4C1A
Archie is a deferred member of a defined benefit scheme that recently entered the assessment period for entry into the Pension Protection Fund [PPF]. He has a deferred pension of £42,000 p.a. and would like to take his benefits when he reaches the scheme’s normal pension age in January 2025. He should be aware that:
a.his benefits cannot come into payment until the assessment period has ended.
b.his benefits can be paid, but only to the level of PPF compensation.
c.his benefits can be paid in full.
d.he will receive benefits to the level of PPF compensation initially, but will receive his full entitlement once the assessment period has ended.
b.his benefits can be paid, but only to the level of PPF compensation.
The insolvency event starts an assessment period, during which the scheme is considered
to see if it meets the criteria for entry into the PPF.
- no new members can be admitted, no further benefits earned and no transfer
values paid;
* benefits can be paid under the scheme but only to the level of PPF compensation - the PPF can intervene in the management of the scheme and give directions to
the trustees; - the PPF will review any ‘moral hazard’ issues;
- the PPF will also review any recent (typically within the three years prior to the
assessment date) rule changes, ill-health early retirements and discretionary increases
granted, which may lead to an increase in PPF compensation; and - the PPF will instruct the scheme actuary to carry out an actuarial valuation as at the day
before the assessment period started (a Section 143 valuation).
Chapter reference 4B1A
The Pensions Ombudsman can investigate complaints about:
a.mis-selling of pensions.
b.State pensions.
c.incorrect or misleading information given by a pension scheme.
d.tracing a lost pension.
c.incorrect or misleading information given by a pension scheme.
Pension ombudsman service generally deals with complaints about how pension schemes are run
- taking too long to do something without good reason;
- failing to do something it should have;
- not following its own rules or the law;
- breaking a promise;
- giving incorrect or misleading information; or
- not making a decision in the right way.
It cannot investigate complaints about:
- State Pensions;
- tracing a lost pension;
- sales or marketing (mis-selling) of pensions; or
- a decision made by a tribunal, court or another Ombudsman.
Chapter reference 4A3
