Learn Learn Learn - Various Flashcards
Learn multiple definitions/concepts across the entire syllabus
Hurdle Rate
The ‘hurdle rate’ is the annual investment return required after charges, to provide a capital sum sufficient to purchase a single life level annuity, with no guarantee period that matches the initial level of scheme pension** payable from scheme **normal pension age.
What is CYC?
The critical yield is the rate of return that would have to be achieved in the defined contribution (DC) pension scheme to replicate the benefits of the DB benefit scheme.
The ‘critical yield’ also includes the capital cost of future escalation for the pension in payment, dependant’s benefits and any guaranteed period.
What is the criteria to enter the PPF?
An employer must suffer insolvency event** and have **no chance of being rescued**. There must be **insufficient assets in the scheme to secure pension benefits on wind up** that are **at least equal to the compensation that the PPF would provide.
What protection is available in the PPF?
Compensation cap at age 65 (2017/2018): £39,006.18
Use table in Tax Table handout
What should a Financial Adviser keep on file?
Fact-find questionnaire.
Disclosure documentation.
Transfer Value Analysis System (TVAS) report.
Cash Equivalent Transfer Value (CETV) Statement of Entitlement.
Statement of pension entitlement and scheme information.
Personal pension research, illustration and key features documentation.
Suitability report.
Proof of pension transfer specialist sign-off.
What should a DB Recovery plan take into account?
The value, terms and enforceability of any contingent security from the Employer
Likely benefits if the Employer becomes insolvent
Any changes expected to the membership profile that could affect funding
Impact on employer and their sustainable growth
Impact if the assumptions do not happen in practice
Anticpated level/cost of the risk based element of the PPF levy during the Recovery Plan
