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IN4014 > Pensions > Flashcards

Pensions Flashcards

1
Q

What percentage of the industrial wage does a state pension give you?

A

34%

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2
Q

What is the average length of retirements?

A

24 years

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3
Q

How can we reduce the pressure on the pension

A
  • More tax increase or more people working)
  • Increase the pension age
  • Decrease the pay out
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4
Q

Defined benifit

A

Guaranteed pay out

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5
Q

What are the 3 pillars of pension?

A

State, occupational, private/personal

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6
Q

What is another name for the social insurance pension?

A

Contributory

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7
Q

How does contributory state pension determine how much you are entitled to

A

You get 1/40th of a pension for every year that you work

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8
Q

Is the contributory pension means tested?

A

No, as long as you have contributed to PRSI

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9
Q

What are the requirements for the contributory state pension

A
  • Over 65, begins at 66
  • Retired from full time work
  • Satisfy PRSI contributions
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10
Q

What is another name for a non contributory pension?

A

Social assistance pension

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11
Q

When do you get the social assistance pensions

A

When you don’t qualify for a contributory pension and your income is below a certain level

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12
Q

Is the non contributory means tested

A

Yes

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13
Q

What is the difference between non contributory and contributory in terms of weekly payment

A

€5

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14
Q

What is pre retirement allowance

A

Allows a person in recipe of long term unemployment benefits to exit the labour market and receive weekly payments instead of unemployment assistance.

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15
Q

Benefits of pre retirement allowance

A
  • No sign on

- Automatic payments into accounts

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16
Q

What are the rates for pre retirement allowance?

A

Same as unemployment assistance

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17
Q

What extra benefits do you get with pre retirement allowance?

A

Rent supplements, Esb allowance, tv license, fuel allowance

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18
Q

What principles are the state pension built on?

A

Contributory principal and principal of solidarity

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19
Q

Contributory principal

A

You are entitled to what you put in

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20
Q

Principal of solidarity

A

Provides income for the venerable

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21
Q

Tripate system

A

The pension is paid for by the tax payer, employer and if there is a short fall the state (exchequer)

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22
Q

What is the social insurance fund (SIF)

A

A fund that all social welfare goes into

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23
Q

What happens if there is an excess in the SIF

A

It is invested and the profits are put into the social insurance fund

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24
Q

What happens if there is a deficit in the SIF

A

The state steps in and acts as an exchequer to meet the short fall

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25
Q

Who manages the SIF current account

A

minister of employment affairs and social protection

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26
Q

Who manages the SIF investment account

A

minister of finance

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27
Q

Occupational pensions

A

Provided through an employer in a private and public sector jobs

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28
Q

What are an employers obligations in terms of an occupational pension?

A

They must facilitate it through pay role and can contribute but are not required to.

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29
Q

What are the 2 types of occupational pensions

A
  • Defined benefit

- Defined contribution

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30
Q

Defined benefit

A

Pays out a set amount every week when you retire, this never changes

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31
Q

How is a DB pension payout calculated

A

Based on your years of service you usually get 1/60th - 1/80th of your weekly salary for each year worked

32
Q

What are the benefits of a DB pension

A
  • Plan your income
  • Simple to understand
  • You don’t assume the longevity risk
33
Q

What are the drawbacks of DB schemes (2)

A
  • Don’t account for the time value of money

- Many schemes are in deficit because of longevity = less reliability.

34
Q

Defined contribution (DC)

A

Employees and employers contribute to a fund that is invested over time and used to buy an annuity or pension on retirement.

35
Q

What does the level of pension depend on in a DC scheme?

A
  • Investment performance
  • Amount contributed
  • Cost of pension/annuity
36
Q

How are your pension entitlements calculated in a DC scheme?

A

You decide how much to contribute and that contributions is used to buy an annuity on retirement

37
Q

Can you change contributions on a DC?

A

Yes

38
Q

Who BUYS a private pension?

A

Those who don’t have access to an occupational scheme - self employed

39
Q

RAC

A

A personal pension that gives a lump sum and pension on retirement

40
Q

If you have an occupational pension what types of private pensions can you get?

A

AVC PRSA not an RAC or PRSA

41
Q

What is a universal pension scheme

A

All your contributions from multiple jobs in one place

42
Q

Longevity risk

A

The risk of you outliving your pension.

43
Q

How has the demand for long term care affected pensions

A

We now need longer real pensions

44
Q

What happens when you pay into a pension fund?

A

You pay into a fund that invests the money in different assets, this is then used to buy a pension/annuity on retirement

45
Q

Where do pension funds invest?

A
  • Cash: less risky
  • Bonds
  • Stocks/equities: very risky
46
Q

What is an AVC

A

A top-up for an occupational pension

47
Q

What is the maximum you can put in an AVC

A

5 time your employer’s pension contributions

48
Q

What is a free-standing AVC (FSAVC)

A

An AVC than is under the control of the employee

49
Q

Why are people getting AVC’S?

A

Private pensions will fail to provide the minim benefits allowable

50
Q

If your pension doesn’t account for your spouse what can you do to get this?

A

Get an AVC

51
Q

Who takes out RACs

A

Self-employed people who are not part of a company scheme

52
Q

What type of pension is an insurance contract

A

RAC

53
Q

What type of pension plan is a RAC (DB/DC)

A

DC

54
Q

What are the types of RAC

A
  • With profit
  • Unit linked
  • Deposit account plans
55
Q

What is the difference between with profit and unit inked policies?

A

With profit are managed by the insurer, unit-linked are when the insured chooses to buy units in a fund run by the insurer and they can move the money around.

56
Q

Can you have a RAC as part of an occupational scheme?

A

No

57
Q

Can you have more than one RAC

A

Yes

58
Q

What are the requirements for a RAC?

A

Taxable income

59
Q

What can you do with a RAC on retirement?

A

Take 25% lump sum tax-free

60
Q

When do you get the benefits of a PRSA

A

60 or earlier in death of incapacity

61
Q

PRSA

A

A personal retirement savings account that requires no taxable income

62
Q

What are the 2 types of PRSAs?

A

Standard (only invest in unit-linked funds) and Non-standard (wider investment options)

63
Q

Can an employer contribute towards a PRSA

A

Yes

64
Q

ARF - approved retirement fund

A

You build up money in a fund to buy this or a pension. It’s like an investment account that you own and take a weekly income from when you retire

65
Q

When must you invest in an AMRF?

A

If you haven’t got a guaranteed pension of €12,700 a year for life you must invest proportion in an ARMF

66
Q

What is an ARMF and when can you access it?

A

It is a fund you can’t access until you are 75, but you can access 4% per year from the age of 65 to 75

67
Q

Who assumes the longevity risk in and AMRF

A

You do

68
Q

Annuity

A

Provides you with a guaranteed income for €190 per year

69
Q

Enhanced annuity

A

Opposite to life insurance, as your mortality increases, you get better rates

70
Q

When do annuities pay put if you become terminally ill

A

If stipulated in the contract

71
Q

Benefits of ARF

A

Gives you more but it is riskier

72
Q

What happens when a pension scheme becomes insolvent?

A

Pensioners get everything first and then employees get what is leftover

73
Q

How do the amendments to the pensions act affect pension wind up

A

People who haven’t retired, people who have retired and workers still get all their entitlements and pensioners get what is left

74
Q

Social welfare and pensions act 2009

A

Government offers to become a pension provider

75
Q

Universal pension enrolment

A

Automatic if you are employed full time earning €20,000 pery ear

IN4014 (11 decks)

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