Chapter 6 - Defined Contribution Schemes Flashcards
What are the 6 main types of DC pension?
Personal/ Stakeholder
Group personal
SIPP
Retirement Annuity Contract
Occupational DC Scheme
Targeted Money Purchase Scheme
What is a Statutory Money Purchase Illustration?
An annual illustration that a DC scheme must send, which shows the future pension amount that might become available.
Any assumed accumulation rate shown in the illustration are based on an accumulation rate determined by the provider
What is the main difference between how contributions are made for a Trust based scheme vs a Contract Based scheme
For a trust based scheme conts are made on a net pay arrangement (cont deducted from their pay before tax is applied)
For a contract based scheme conts made from earnings once tax and NI have been applied
What are the 4 requirements for a trust to be defined as a master trust?
Provides DC benefits
Is used by 2+ employees
Is not used by employees that are connected with each other
Is not a public service scheme
What must a contract based workplace pension have?
An Independent Governance Committee
Name 3 differences between a SIPP vs SSAS
Governance: SIPP governed by contract between member and provider, whereas SSAS governed by trust deed
Investments: SIPP investments chosen by member, SSAS chosen by trustee
Type of arrangement: SIPP is individual DC scheme, SSAS is an occupational scheme
Name 4 rules of Stakeholder Pensions
Must accept cont of any frequency
Min contribution cannot be higher than £20
Must not impose transfer charges
Charges are 1.5% for first 10 years, then 1% PA thereafter
Can a member continue contributing to a group occupational scheme after leaving their role?
Yes
Paul became a deferred member of a defined benefit occupational pension scheme in January 2014, after two years’ service. What minimum rate of revaluation, if any, will be applied to his deferred benefits?
A rate of 2.5% or inflation, whatever is lower
A member of an occupational DC scheme wishes to transfer her benefits to a stakeholder scheme. What conditions, if any, can the stakeholder scheme require the transfer value to meet?
None, the stakeholder scheme must accept the transfer
How are serious ill health lump sums taxed?
If the person is under age 75, the serious ill-health lump sum will be tax free. If the person is 75 or over, it will be subject to income tax. If the serious ill-health lump sum exceeds the individual’s remaining lifetime allowance, the excess will be subject to income tax at their marginal rate.
What default investment option must be offered under an employer’s group stakeholder pension scheme?
A lifestyle fund
