Chapter 7 - Secured Pension Options Flashcards
Name 3 requirements of small pots
Valued at £10,000 or less
Max of 3 pots from non occupational schemes
Small pots not tested against the LTA
Name 4 conditions for a lump sum payment to be considered a trivial commutation
Member has not been paid a trivial commutation previously
Value of the members pension rights does not exceed £30,000
Member has available LTA
Member must be of normal pension age (55)
What are the two occasions when a trivial commutation lump sum death benefit may be paid
- If a survivor commutes a survivors pension
- If a member dies within the guaranteed period of a pension they are receiving
If the lump sum for a trivial commutation exceeds £30,000 what happens?
It’ll be classed as an unauthorised payment and taxed accordingly
How do you value the Uncrystallised rights of a DC and DB scheme?
DC: simply the value of the fund
DB: Annual pension entitlement at nominated date x 20, plus any PCLS
To qualify as a scheme pension, HMRC requires… (3)
Pension must be paid for the lifetime of the member
Be paid at least annually
Be incapable of being reduced year on year
What is the difference between the source of a Pension Protection Lump Sum and an Annuity Protection Lump Sum?
Pension protection must be paid from a DB scheme
Annuity protection must be paid from a DC scheme
What are the two main factors affecting annuity rates?
- Long term bond yields
- Longevity expectations
What’s a main difference between a unit linked annuity and a with profits annuity?
A unit linked linked annuity does not offer smoothing with its investments, so these are considered higher risk
How does the death benefit guarantee time period differ between a scheme pension vs lifetime annuity?
For a scheme pension the guaranteed pension is no more than 10 years
For a lifetime annuity there is no time limit
Under a public sector pension scheme, what is normally the maximum permissible pension commencement lump sum at retirement?
120/80ths final pension salary only
