Exam Extras Flashcards
Stat money purchase illustrations - schemes that don’t get these (2), how is projected benefit calc’d (4 parts)
Main assumptions;
- acc rate and provider and takes into account what before what
- todays terms and inflation assumption
- future contributions and earnings related + AE
- what must be taken into account (2)
- interest and annuity rates + increases and guaranteed
- PCLS
- expenses %
- spouse pension
- mortality
Schemes that don’t receive these - retirement annuity contracts and SSASs.
Projected benefit calc’d - current fund + contributions - charges - risk bens (pension term assurance).
Main Assumptions;
— Projections are based on acc rate determined by provider which takes into account;
- expected returns to retirement before the deduction of expenses and charges.
— Projection converted into todays terms assuming for inflation of 2.5%
— future contributions taken into account and if earning related increase in line with inflation at 2.5%
- if AE conts, can choose to include future increases to min conts and if ignored, must made clear on SMPI.
— future charges and expenses must be taken into account
— rate of interest in calcing annuity rates must be determined each year on Feb 15th. Can assume annuity rate does or does not increase and provider can choose to take into account guaranteed annuity terms.
— Can assume PCLS taken and must be expressed in todays terms.
— Expenses assumed at 4% of value of annuity
— inclusion of spouse’s pension at providers discretion.
— no allowance for mortality before retirement & mortality after based on mortality tables.
Working out income to establish Pension Credit entitlement
Income calculated and includes;
- state pension, private pension, earnings, social security bens and savings over £10k.
Savings are deemed to provide income of £1 for every £500 e.g. (16,650-10k/)500= 13.30 then rounded up to nearest pound.
Short service refund - charges and length of service to be entitled
- First 20k charged at 20%
- everything above charged at 50%
DB - 2 years
DC - 30 days
Formula to check LTA remaining
Value of existing benefits as per BCE/LTA for that tax year (previous BCE) = %
Purchase of Lifetime Annuity - not a BCE when..
Purchase of lifetime annuity is not a BCE if purchased using crystallised funds in drawdown.
BCE 1 & therefore already tested.
Employer conts and tax relief - how to work out if spreading and accounting periods
210% x previous pens cont = if higher than new contribution then need to work out how spread.
Spreading - new contribution amount - (previous cont amount x 110%)
Excess over £500k spread;
- 500k-999k = 2
- 1m - 1.9m = 3
- 2m+ = 4
How to work out increased in deferred BSP pre and post 04/16
Pre - 134.25 x 10.4% = y*years deferred = increase amount
Post - 134.255.8% = yyears deferred
How to work out residual pension - formula
Will need to work out PCLS via PTM first
Precomm pen - (PCLS/factor)
Enhanced LTA post 04/06 and in payment formula (pension credit received)
Pension credit/LTA when received pension credit = %
LTA + (1.8m*%) = enhanced LTA at time they take their bens
Enhanced LTA for pension credit pre 04/06 formula
Pension credit/1.5m = % applied to LTA
Total Pension Input - DB schemes - how to work out TPI
Accrued bens16 = ACPI increase (1.CPI) = B
Accrued bens*16 = C
C-B = TPI
Pension sharing - can (5) and cant be shared (4), death and marriage effects and tax implications
Can - protected payment on NSP, SERPS & S2P, occ schemes, privates pens and statutory schemes.
Can’t - NSP, BSP, Graduated Retirement benefits and widowers pension
Death and remarriage no effect as immediate and no tax implications for member.
PPF & Pension Debit - formula + how does pension debit effect PPF
Bens at a day - pension debit = X
(X - 1.5m)/1.5m = new PPF - if minus amount then lost
Recovery plan should include/consider
- security, insolvent, membership, growth, assumptions and PPF
- value, terms and enforceability of security from employers
- likely bens available if insolvent
- any changes to membership profile that may effect funding
- impact on employees and plans for sustainable growth
- impact of assumptions not realised
- risk-based element of PPF levy
PPF -compensation levels - 100% (3), 90% (capped and reduction + 2), other (3 + payments to spouse) and long service cap (what is it, how increased and includes, 2)
100% of benefits when;
- Members have reached normal retirement age on insolvency event.
- members already in receipt of survivors benefit on IE.
- Members in receipt of pension due to ill health (up to 100% and reviewed case by case)
90% capped at £41k at age 65 (reduced in line with age if under) + long service cap members;
- Members who have retired but yet to reach schemes retirement age at IE.
- Deferred members who have not reached schemes retirement age at IE.
Other (all after IE)
- 50% for spouse Survivors benefits
- 25% for qualifying child when above also in payment (max 50% if more than 1)
- 50% for qualifying child (max 100% if more than 1)
Payments for spouse determined by rules of scheme.
Long service cap - for members with 21 years of more service with scheme. Cap is increased by 3% for each year above 20 up to a max of double the standard cap. Includes;
- individuals already in receipt of PPF compensation.
- members whose schemes were in the assessment period.
