Part 6 - Special Situations Flashcards
Which Act abolished LTA
Finance Act 2024
When was LTA abolished from?
6 April 2024
What change is now measured in place of LTA
🤍 Certain Tax free lump sums against a fixed monetary capped amount called the Lump Sum Allowance (LSA). The capped amount is set at £268,275
🩶 Certain lump sum death benefits, tax free lump sums under the LSA and serious ill-health lump sums that are paid tax free against a fixed allowance called the Lump Sum and Death Benefit Allowance. The capped amount in £1,073m
What Regulations set out the New Transfer Regulations and who published these?
The Department for Work and Pensions
The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021
What flexible options have individuals age 55 and above had since April 6 2015, in respect of DC Funds?
🤍 Leaving the fund untouched
🩶 Taking a guaranteed income (annuity)
🤍 Opting for an adjustable income (flexi-access)
🩶 Taking cash in chunks (partial withdrawals)
🤍 Withdrawing the entire pension pot in one go
🩶 Combining multiple options
What legislation set out requirements for trustees to actively signpost members towards the government backed guidance
The Occupational and Personal Pension Schemes (Disclosure of Information) Regulations
What must firms regulated by the Financial Conduct Authority (FCA) include in their guidance
🩶 Include a clear and prominent statement about the availability of guidance in their communications
🤍 Encourage individuals to seek either free guidance or professional financial advice before making pension decisions
🩶 Provide appropriate risk warnings to individuals choosing to access their DC pension savings on an execution only basis
Reasons a pension scheme may decide to wind up
🤍 No longer wishes to make required level of contribution (too costly)
🤍 Membership of the scheme is too small to justify the costs
🤍 Company is no longer able to (e.g Insolvency)
🤍 The continuing cost of providing DB pensions
What did The Occupational and PersonalPension Schemes (Conditions for Transfers) Regulations 2021 set out?
The conditions that must be satisfied before a statutory pension transfer can take place
What are the two conditions in relation to transfer of which either be saitisfied
🤍 First Condition is met if the receiving scheme is of a type listed in the transfer regulations
🩶 the Second Condition applies to transfer into all other schemes and for this to be met the Trustees must consider additional scam risk indicators by carrying out certain checks.
What must the receiving scheme be in order to satisfy the first condition
🤍 a public service pension scheme
🩶 an authorised Master trust listed by the Pensions Regulator (tPR)
🤍 An authorised Collective Defined Contribution (CDC) scheme included on the list to be published by tPR
What checks are included in the Second Condition
🤍 whether there is an employment link if the transfer is ti either an occupational pension scheme or a QROPS
🩶 whether there is a residency link if the transfer is to a QROPS
🤍 for the presence of amber of red flags
List the Red flags
🔺 the member has failed to provide the required information
🔺 the member has not provided evidence of receiving MoneyHelper guidance
🔺 there is evidence that someone has carried out a regulated activity without the required regulatory status
🔺 the member requested a transfer following unsolicited advise
🔺 the member has been pressured to make the transfer
List the Amber flags
🔸 the member has not demonstrated an employment link or residency link
🔸 the evidence may not be genuine or may not have been provided directly by the member
🔸 the member cannot demonstrate an employment link or residency link
🔸 high risk or unregulated investments are included in the scheme
🔸 the scheme charges are unclear or high
🔸 the schemes investment structure is unclear or unorthodox.
🔸 overseas investments are included in the scheme
🔸 a sharp unusual rise in transfers involving the same scheme or adviser
What must schemes do if one or more amber flag is present?
Direct to MoneyHelper to obtain guidance before the transfer proceeds
What happens if one or more red flags are present
The scheme must refuse the transfer and notify the member of their decision within seven working days
What are the two types of Climate risk
🤍 Event driven (acute)
🤍 Longer term shifts (chronic)
What must the Statement of Investment Principles set out from 1 October 2019?
How Trustees take account of financially material considerations (which include environmental, social and governance) over the longer term
What does TCFD stand for?
Task force for Climate risk Financial Disclosures
What is the TCFD framework designed for?
🤍 to help investors understand the climate related risks in their portfolio
What does the TCFD set out?
the Trustees:
🤍 strategy regarding climate related risks
🤍 their governance
🤍 their approach to risk management and
🤍 include targets and metrics which will provide a measure of the schemes carbon footprint
What Cyber risks apply to pension schemes?
🤍 hacking attacks against the scheme or a third party administrator
🤍 loss of a laptop containing member data
🤍 virus or malware introduced into the computer system
🤍 scheme administrators falling victim to a phishing email
What guidance has tPR published for trustees on Cyber Security?
🤍 A cyber risk assessment cycle, to assess risks, identify mitigations and then monitor and report
🤍 Governance requirements
🤍 Possible controls
🤍 How to respond to an incident
🤍 Recognition that cyber risk is a dynamic and evolving risk
What are the National Cyber Security’s 10 steps to cyber security to help organisations protect themselves in cyber space?
(REAL AVID IS)
1) Risk Management
2) Engagement and training
3) Asset Management
4) Architecture and configuration
5) Vulnerability protection
6) Identity and access management
7) Data security
8) Logging and monitoring
9) Incident management
10) Supply chain security
Key activities to be completed by a DB scheme within two year period of the wind up date
🤍 Calculating whether there is a section 75 debt on the employer, and if so, serving that debt
🩶 Obtaining terms from insurers to secure benefits for pensioners and non pensioners
🤍 Allocating available assets to members in accordance with the statutory priority order
🩶 Issuing option letter to non pensioners
🤍 Paying benefits in accordance with options exercised
🩶 Securing benefits
🤍 Providing details of the benefits that have been secured with an insurer
🩶 Conducting a final actuarial valuation
🤍 Obtaining final audited accounts
What are the five areas covered in the Pensions Regulators guidance for trustees on cyber security?
(REALI)
- Risk Assesment
- Education and Awareness
- Access Management
- Legal and Compliance
- Incident Response and Recovery
Risk Assessment
Trustees should identify cybersecurity risks, assess vulnerabilities, and document risks in their risk register.
Education & Awareness
Trustees must ensure that staff and service providers are trained in cybersecurity risks such as phishing attacks and social engineering
Access Management
Strict access controls should be implemented to protect sensitive pension data. This includes multi-factor authentication and limiting access to only those who need it.
Legal & Compliance
Trustees must comply with data protection laws (UK GDPR, Data Protection Act 2018) and report data breaches to the Information Commissioner’s Office (ICO) within 72 hours.
Incident Response & Recovery
Trustees should have a cyber incident response plan, ensuring quick detection, containment, and recovery from cyberattacks.
R – Risk Management
Take a risk-based approach to protecting systems and data by identifying key threats.
E – Engagement & Training
Build cybersecurity awareness through staff training to prevent phishing and fraud.
A – Asset Management
Keep an inventory of all systems and data to understand what needs protection.
L – Logging & Monitoring
Monitor systems for suspicious activity, ensuring quick threat detection
A – Architecture & Configuration
Secure IT systems by implementing best security practices and keeping them properly configured.
V – Vulnerability Management
Regularly update software and systems to fix security weaknesses.
I – Identity & Access Management
Control who has access to critical data, using multi-factor authentication and access restrictions.
D – Data Security
Protect sensitive pension data using encryption, backups, and secure storage.
I – Incident Management
Develop plans for responding to cyberattacks, including recovery strategies.
S – Supply Chain Security
Work with third-party providers to ensure they meet cybersecurity standards, reducing the risk of breaches from external suppliers.
Which legislation relates to cross border provisions of Pension schemes
Pensions Act 2004
EU Directive on Institutions for Occupational Retirement providing 2003/41
What does cross border provisions legislation set out?
🤍 Allows employers to use a UK Scheme to cover EEA based employees
🤍 Defines cross border activity in terms of acceptance of contributions in respect of members working in an EEA country outside the UK
🤍 Requires UK schemes operating cross border to be fully funded at all times
🤍 Requires UK schemes to comply with host country social labour laws relevant to occupational pensions in respect of members in the host country. The host country is the EEA state in which the member works
When did UK stop being a member of the EU single market or Customs Union
1 January 2021
What must a solvent employer need to wind up a pension scheme?
The assets of the scheme must be sufficient to allow the trustees to buyout the accrued benefits in full with an insurance company
What information must be given to members during the wind up period
🤍 Must be in writing
🤍 Within one month, advising that wind up has commenced
🤍 Reason scheme is being wound up
🤍 Statement to active members on whether death benefits will continue to be provided
🤍 Inform members whether an independent trustee has been appointed
🤍 Supply a name and address for further enquiries
When must a wind up progress report be issued?
Every 12 months following the initial notice
What should a wind up progress report contain?
🤍 Action being taken to recover any assets not immediately available
🤍 The estimates date when final details of member benefits are likely to be known
🤍 The extent (if any) to which the value of the members benefits is likely to be reduced
Key activities to be completed by a DC scheme within two year period of wind up date
🤍 Receipt or recovery of all member/ employer contributions due from the employer
🩶 Establishing that all pensioner members have annuity policies set up in their own name, providing the correct scheme benefits
🤍 Production and sign off of final accounts accounting for and reconciling all assets/ cash held in trustee bank accounts and investments manager/ provider accounts.
🩶 Establishing that all other beneficiaries have been identified, fund values determined, secured and statements issued
🤍 Providing options to members
What are the final three stages of winding up a pension scheme that is not admitted to the PPF
🤍 Final set of accounts: showing no assets or liabilities remaining
🩶 A Deed of Termination is then produced and the scheme is formally wound up
🤍 the Trustees must also report to HMRC (via the Event Report) and tPR (via Exchange) that the wind up has been completed
