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Financial Planning & Advice > Financial Planning & Advice > Flashcards

Financial Planning & Advice Flashcards

1
Q

Actuary

A

An independent person who is professionally qualified to give advice on the financial position of a pension scheme

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2
Q

Additional Voluntary Contributions (AVC’s)

A

Employee contributions over and above any compulsory contributions to a tax-approved workplace pension scheme

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3
Q

Annual Allowance

A

The maximum tax-relivable amount that can be contributed by a member, or employer on behalf of a member. in a tax year, before liability to an annual allowance charge

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4
Q

Annual Allowance Charge

A

The tax charge levied on a member of one ore more pension schemes, whose total contributions made by the member, or on their behalf by an employer or other party, exceed the annual allowance. The excess is subject to the annual allowance tax charge.

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5
Q

Annuity

A

Income from a capital investment paid in. a series of regular payments

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6
Q

Appropriate Pension Transfer Analysis (APTA)

A

A qualitative analysis of the benefits, disadvantages and risks of each arrangement required of a pension transfer specialist when making a recommendation

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7
Q

Auto-enrolment

A

UK employers must automatically enrol eligible jobholders (making over 10,000, over 22 and under SPA) into a qualifying pension scheme that meets minimum standards.

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8
Q

Benefit Crystallization Event (BCE)

A

A defined event or occurrence that triggers a test of the benefits crystallizing at that point against the individuals available Lifetime Allowance

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9
Q

Capital Gains Tax (CGT)

A

Tax paid on profits realized from selling assets (or disposing of assets) in a tax year. In the UK, there is an annual exempt amount (12,300). CGT is paid at rates determined by the taxpayers income tax status (10/20% for securities and 18/28% for properties)

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10
Q

Capped Drawdown

A

A type of income drawdown product available to those who were already in capped drawdown on 5 April 2015. Withdrawals are subject to a maximum income level but not a minimum level.

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11
Q

Commutation (Conversion)

A

Immediate payment of a single sum to extinguish person entitlement, either because the scheme member’s pension is of a trivial value, or because the scheme member has a life expectancy of less than 12 months

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12
Q

Defined Benefit (DB) Pension Scheme

A

An arrangement other than a money purchase arrangement that provides only defined benefits. Defined benefits are calculated by reference to the earnings and service of the member, and are also known as final salary or career average revalued earnings (CARE) schemes

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13
Q

Defined Contribution (DC) Pension Plan

A

A pension scheme in which the employer and employee agree on a set amount to be contributed to an individual pension fund. The contributions are invested to provide a fund on retirement. Unlike defined benefit schemes,

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14
Q

Dependants

A

People who were married to, or a civil partner of, the member at the date of the member’s death. A child of the member is a dependant if they have not reached the age of 23 or has reached 23 and in the opinion of the scheme administrator, was at the date of the member death dependent on the member because of a physical or mental impairment.

A person who was not married to the member or was not in a civil partnership with the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death;

  • the person was financially dependent on the member
  • the person’s financial relationship with the member was one of mutual dependence, or
  • the person was dependent on the member because of physical or mental impairment
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15
Q

Domicile

A

In UK law, an individual has only one domicile. This is the country they regard as their permanent home. This is not necessarily the same as residence or nationality.

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16
Q

Drawdown Pension

A

A short term annuity or income withdrawal paid to a member of a registered pension scheme

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17
Q

Drawdown Pension Fund

A

A pension fund in respect of an arrangement consisting of the sums or assets held for the purposes of the arrangement

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18
Q

Endowment Policy

A

A life assurance policy that pays out a sum assured on the death of the life assured, or at the end of an agreed term, whichever is earlier. The money is traditionally invested in a range of securities, including equities. A traditional with-profits policy includes the addition of bonuses.

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19
Q

Enhanced Protection

A

This provides full protection for the value of the whole of an individual’s pension rights as of 5 April 2006.

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20
Q

Fixed Protection

A

Fixed protection 2012 maintains the LTA of 1.8 million. Fixed protection 2014 maintains the lifetime allowance of 1.5 million. Fixed protection 2016 maintains the lifetime allowance of 1.25 million.

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21
Q

Her Majesty Revenues & Customs (HMRC)

A

The tax-collecting agency of the UK government

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22
Q

Individual Protection

A

This gives individuals a protected LTA equal to the value of their pension savings as of either 5 April 2014 or 2016. This was subject to a maximum of 1.5 million for IP14 and 1.25 million for FP16.

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23
Q

Inflation

A

A measure of the rate of change in prices or earnings

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24
Q

Inheritance Tax (IHT)

A

Tax paid on death or on some lifetime gifts subject to a threshold

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25
Q

Lifetime Allowance

A

The amount set by HMRC on total pension savings payable from a scheme before an additional tax becomes due (25% on the excess for income or overseas pension transfer, 55% on the excess for lump sum).

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26
Q

Lifetime Allowance Charge

A

The tax charge payable on excess funds, following a BCE, for any members with a benefit value greater than their lifetime allowance

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27
Q

Lifetime Annuity

A

An annuity contract purchased under a money purchase arrangement from an insurance company of the members choosing that provides the member with an income for life

28
Q

Money Purchase Annual Allowance (MPAA)

A

When the member has taken advantage of flexible access, for example by taking an uncrystallized funds pension lump sum, the member can only contribute 4000 annually to a money purchase scheme. Unused MPAA from previous years cannot be carried forward.

29
Q

Money and Pensions Service (MaPS)

A

The new name for the Single Financial Guidance Body (SFGB), a government run financial information and guidance body which united and replaced The Money Advice Service, Pension Wise and The Pensions Advisory Service

30
Q

Money Purchase Arrangement

A

An arrangement is a money purchase arrangement if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance or other money purchase benefits

31
Q

Money Purchase Benefits

A

Benefits provided under a pension scheme, calculated by reference to payments made under the scheme by the member or any other person or employer on behalf of the member; or any other factor

32
Q

Occupational Pension Scheme

A

A defined benefit or defined contribution registered pension scheme established by an employer or group of employers to provide benefits to, or in respect of any, or all of the employees of that employer or group of employers, or any other employer. This is now often referred to as a ‘workplace pension.’

33
Q

Opt Out

A

The facility for a person to formally opt out of auto-enrolment

34
Q

Overseas Pension Scheme

A

A pension scheme is an overseas pension scheme if it is not a registered pension scheme but it is established in a country or territory outside the UK and satisfies the requirements in the Pension Schemes Regulations 2006

35
Q

Packaged Products

A

Life policies, unit trusts or OEICs, investment trusts, stakeholder pensions or personal pensions

36
Q

Pension Attachment Order

A

A process by which some of the pension benefits due to a member are paid to the ex-spouse, as directed by a court at the time of a divorce, but are only paid when the member retires

37
Q

Pension Commencement Lump Sum (PCLS)

A

The tax-free lump sum which may be paid to a member on taking pension benefits

38
Q

Pension Credit

A

The amount of benefits rights that an ex-spouse or former civil partner becomes entitled to following a pension sharing order. Also an income-related means-tested benefit which boosts a pensioner’s State Pension to ensure they have a minimum level of income

39
Q

Pension Credit Member

A

Former spouse or former registered civil partner who is credit with pension rights in a scheme by virtue of a pension sharing order

40
Q

Pension Input Amount

A

The amount of contributions paid or increase in value of member’s benefits in a registered pension scheme and measured for annual allowance purposes

41
Q

Pension Input Period (PIP)

A

The period over which the pension input amount is measured

42
Q

Pension Sharing

A

If a scheme member’s marriage ends in divorce or registered civil partnership is dissolved, a pension sharing order provides the former spouse or civil partner with a share of the scheme member’s pension

43
Q

Pension Sharing Order

A

An order or provision following a divorce or the dissolution of a civil partnership which makes provision for the pension rights of a scheme member to be split

44
Q

Pension Transfer Specialist

A

An individual authorized by the FCA to provide advice on the transfer of safeguarded benefits. Such an individual must have passed an appropriate examination, for example the CISI Pension Transfer and Planning Advice

45
Q

Personal Pension Scheme

A

A scheme provided by an insurance company or other financial institution to enable members to save for retirement benefits on a money purchase basis

46
Q

Phased Retirement

A

This involves accessing pension benefits in a number of tranches compared to the traditional approach of securing pension benefits at one point in time

47
Q

Qualifying Period

A

The period a scheme member must complete in order to qualify for the award of retirement benefits

48
Q

Qualifying Recognized Overseas Pension Scheme (QROPS)

A

A recognized overseas pension scheme is a qualifying recognized overseas pension scheme if it satisfies certain HMRC requirements. The scheme manager must notify HMRC that the scheme is recognized and provide evidence to HMRC when required. The scheme manager must also sign an undertaking to inform HMRC if the scheme ceases to be recognized and comply with any prescribed information requirements imposed on the scheme manager by HMRC

49
Q

Qualifying Service

A

Service that counts towards the qualifying period that a scheme member needs to complete to be entitled to retirement benefits

50
Q

Registered Pension Scheme

A

A pension scheme is a registered pension scheme at any time when, either through having applied for registration and been registered by the HMRC, or through acquiring registered status by virtue of being an approved pension scheme on 5 April 2006.

51
Q

Retirement Annuity Contrat (RAC)

A

An annuity contract between an insurance company or friendly society and a self-employed person or someone not in pensionable employment which was established prior to 1 July 1988

52
Q

Retirement Benefits

A

Pension and (tax-free) lump sum payable subject to completion of a qualifying period and other conditions depending on the type of retirement

53
Q

Scheme Administrator

A

The person or body responsible for the day to day management of a scheme, including the maintenance of a members record, the calculation and payment of benefits and the collection of contributions

54
Q

Self-invested Personal Pension (SIPP)

A

A personal pension aimed at those wishing to benefit from greater flexibility with investments

55
Q

Scheme Pension

A

A pension paid to a dependant of a member of a registered pension scheme following the death of that member, the entitlement to which is an absolute entitlement under the scheme

56
Q

Short-Term Annuity

A

From 6 April 2011 an annuity contract purchased from a member’s unsecured pension fund held under a money purchase arrangement that provides that member with an unsecured pension income for a term of no more than five years

57
Q

Small Self-Administrated Schemes (SSAS)

A

Company pension for executives- up to 11 members

58
Q

Sponsoring Employer

A

In relation to an occupational pension scheme, this means the employer, or any of the employers, to or in respect of any or all of whose employees the pension scheme has, or is capable of having, an effect as to provide benefits

59
Q

State Earnings-Related Pension Scheme (SERPS)

A

SERPS was also known as the Additional State Pension. It ran from 6 April 1978 to 5 April 2002, when it was replaced by the State Second Pension

60
Q

State Second Pension (S2P)

A

The second tier of state pension arrangements from 5 April 2002 until 2016

61
Q

Tapered Annual Allowance

A

A tapered annual allowance applies to high earners; those who have an adjusted income greater than 240000 and whose threshold income is greater than 200,000

62
Q

Transfer Value Comparator (TVC)

A

A visual illustration of the potential cost of transferring out of a defined benefit pension scheme. A pension transfer specialist is required to provide a TVC as part of the suitability report when providing advice

63
Q

Uncrystallized Funds

A

Funds held in respect of the member under a money purchase arrangement that have not as yet been used to provide that member with a benefit under the scheme, so have not crystallized.

64
Q

Uncrystallized Funds Pension Lump Sum (UFPLS)

A

An authorized lump sum paid on, or after, 6 April 2015 directly from pension savings on reaching 55 or over. There is no limit on the amount that can be paid subject to having the available lifetime allowance. 25% is paid tax free and the remaining 75% is subject to the members marginal tax rate

65
Q

Whole of Life Policy

A

Whole of life assurance polices will result in the payment of the sum assured on the death of a life assured, whenever that occurs.

Financial Planning & Advice (1 decks)

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