Knowledge Gaps - Retirement Options Flashcards
What is the most common way of providing a workplace pension for employers?
Through a master trust
What is a benefit of using master trusts for employers?
Gives employers with protection/ governance at a lower cost than having its own scheme - also more control over contribution/ benefit levels for employees
What is the National Employment Savings Trust (NEST)?
A master trust to support autoenrolment for employers no matter how small or large
What are the main differences between eligible & non-eligible jobholders?
Eligible - 22+ automatically enrolled if earning £10k+
Non-eligible - Not autoenrolled and only provided with info if 16-21 and earning more than 10k+, or earning between £6k-£10k
Do employers have to provide entitled workers with information on how to opt in to their pension scheme?
Yes
How are eligible jobholders also classed as?
type 1 workers
What is the staging date with regards to autoenrolled pensions?
The date when employers needed to implement changes required in the workplace pension reforms and be in a position to autoenrol empoyees
What do employers have to provide to employees if they want to postpone the date they enrol an employee in to a pension?
Postponment notice
When do employers not have to autoenrol eligible jobholders?
When the co only has one director
What is the range of a members qualifying earnings for autoenrolment purposes which employers have to pay in to pension?
Between £6240 & £50,270
In % terms how much must an employer pay in to a pension?
3%
In % terms how much must an employee pay in to a pension?
5%
Does a pension scheme member have to retire in order to be able to take their benefits?
No
What is small pension pot commutation?
Allows people with less than £10k in pension schemes to take the benefit as a cash lump sum
When can someone be eligible for small pension pot commutation?
Whhen the pot is less than £10k, when person is under 55 & in ill health
What is trivial commutation and when can somone be eligible?
When someone wants to take pension benefits which are less than £30k for all schemes, need to be under 55
What is the tax treatment of small pension pot & trivial commutation?
25% tax free and remainder subject to tax on member’s rate
What is an uncrystallised fund pension lump sum (UFPLS) ?
A lump sum a member can take when over 55, can take 25% tax free cash - any more is subject to amrginal tax rate
Which allowance does taking UFPLS trigger?
The Money Purchase Annual Allowance
What is someone who takes out an annuity called?
The annuitant
What is an annuity?
A oproduct bought from a pension provider which guarantees an income in retirement
Is income from annuities taxable?
Yes
What does the income from an annuity depend on?
- amount of pension pot
- annuity rate
What determines annuity rates?
Gilt yields
life expectancy
Age
Health & lifestyle
What is an impaired life annuity?
An annuity which offersd higher rates for those with specific medical conditions (because they’ll have shorter lifespans)
What is an enhanced rate annuity?
Offer higher rates to those with specific conditions/ lifestyles (e.g obese or smokers)
What are the two types of drawdown options for pensions?
Capped drawdown
Flexi-access drawdown
What is capped drawdown and when did people stop being able to use it?
Taking benefits via drawdown whilst staying invested, stopped April 2015
what is the maximum income level for capped drawdown?
150% of income
Are capped drawdown pensions subject to MPAA?
No
What is flexi-access drawdown?
When someone can drawdown any amount they like over any period they choose
When is the MPAA triggered for flexi access drawdown arrangements?
When someone startes to take an income from pension
How are both capped drawdown & flexi access drawdown subject to tax?
Subject to income tax
Which pension income options are offered through a defined benefit scheme?
A member of a defined benefit scheme can take a lump sum as defined in the scheme rules
plus a pension. This will depend on their final salary (or career average salary), their length
of service and the scheme’s accrual rate as well as an income
What is phased retirement?
When someone starts taking pension benefits whilst working, portion of the pension is crystalised to provide an income
What are 2 benefits of phased retirement?
Funds which aren;t crystalised can remain invested
Allows potential for better annuity rates when someone is older
What is a risk of phased retirement?
Pot stays invested so could reduce
What is delayed retirement?
Leaving pension benefits uncrystalised and taking retirement income from other sources (ISAs etc)
If a DC member dies after receiving their beenfits, what are the 4 categories of recipients
Nominees
Survivors
Successors
Dependents
Who is classed as a nominee for recipients of pension death benefits on another’s death?
Someone the pension member has requested receives benefits on their death
Who is classed as a survivor for recipients of pension death benefits on another’s death?
Specifically for annuities, those who will receive the annuity income
Who is classed as a successor for recipients of pension death benefits on another’s death?
People who have been nominated by the nominee to receive benefits when the nominee dies
Who is classed as a dependant for recipients of pension death benefits on another’s death
Only for scheme pensions, usualy kids/ spose who receive benefits from death in service scheme pensions
What are the benefits for receiving a lifetime annuity on death?
Remaining guarantee period paid to nominee
Receive the survivor’s annuity
What are the benefits for receiving a lifetime annuity on death?
Successor/ nominee can take entire pension as a lump sum & purchase an annuity with the pension fund
What is the difference for tax treatment when death benefits are paid under 75 compared to over 75?
Under 75 - benefits paid tax free to nominee/ survivor/ successor
Over 75 - subject to income tax at marginal rate
