Important Af7 Flashcards
APTA Statutory right to transfer Ip16 Db death benefits Lta Cash flow
Reducing sequencing risk
Longevity risk
Safe withdrawal rate
FP16
No minimum value
No accrual after 4/4/16
Protection 1.25m
Cannot hold fo12, primary or enhanced
Ip16
Benefits must have been over 1m at 5/4/16
Can have more accrual
Protection is value of benefits at 5/4/16 to 1.25m max
Cannot have primary or ip14
Cash flow
Stress test …..
Permanent loss of asset
Investment returns lower than forecast
Living longer than expected
Inflation higher than forecast
Large ad hoc withdrawal unplanned
Need to increase income
How to reduce sequencing risk
Use specialist portfolio
Reduce spending
Cash reserve
Rising equity glide path - ie start in cash and drop fees over to equity
Statutory right to transfer
Deferred member
Nor requested statement of entitlement in 12m
More than 1 year to scheme retirement age
Formally apply following request for statement of entitlement
Take all safeguarded benefits at the same time
Unless receiving scheme unable to accept Gmp benefits
APTA
Client
Impact on tax and state benefit access
Plan for longer than average life expectancy
Scheme
Consider likely pattern of benefits from ceding and receiving scheme
How does each scheme meet client needs including death benefits
Any trade offs when prioritising objectives
Adviser Take account of all charges now and in future whether or not transfer takes place. Rates of return reflect likely return from proposed asset class investments to be used
fca
Must use TVC
Use cobs assumptions to illustrate income likely to be paid from ceding scheme at point of retirement
Max pcls 18:1 50k pension
50000 x 18
___________. = 243243
1+(0.15x18)
Post commutation pension = 36487
Lta value 972983
PPF
100%. Members at NPA
Members in receipt of ill health
Survivors pension in payment
90% Members not reached NPA
(Cap)
50%. survivors/ dependant pension not in
Of. Payment
Member
Ent.
Cetv
Calc members pension at date of leaving
Revalue using scheme inflation assumptions to NRA
Capitalise using annuity rates assumptions
Discount back to today’s rates using scheme investment returns assumptions
= ICE
Adjust ie increase or decrease
=CETV
TVC
Pie
Benefits
Higher initial income
Higher spouse income initially
May benefit those with reduced life expectancy or who need more income early in retirement
Pie
Drawbacks
May live past break even
Higher value tested against lta
May affect state benefits
May put into higher income tax bracket
Inflation may be higher than expected.
