Pensions Law And Regulations Flashcards
What pensions do the pensions regulator cover?
Ocupational schemes (DC or DB)
Auto enrolment
Large public service schemes
Stakeholder pensions
(Basically workplace only)
How do the pensions regulator approach regulation?
Risk based and proportionate
I.e., higher risk get more attention
What are the powers of the pension regualtor?
Investigate potential issues with schemes
Seek to have problems addressed when identified
Prevent parties from avoiding their obligations.
What orders can the pensions regulator use to prevent parties from avoiding obligations?
Contribution notice
Finacial support directions
Restoration orders - unwind under value transactions
What does the pension regulator advice to avoid pension scams?
Warry of unsolicited contact
Check FCA register
Check FCA known scams
Avoid being rushed
(One extra)
What 3 services former services does MoneyHelper now run?
Money and Pensions service - guidance and information
PensionWise - retirement guidance
The Pension Advisory Service (brand no longer used)- Dispute resolution.
What powers do MoneyHelper have for dispute resolution?
No binding powers.
Cannot get involved before local resolution has been attempted
Cannot get involved after an ombudsman is involved
What does the financial ombudsman service handle?
Complaints against firms in respect of regualted activities in sales and marketing of products.
Who are eligible complainants to the FOS
Individuals (including guarantors)
Charities- annual income under £6.5
Trustees- trusts under £5m net assets
Consumer buy to let borrower.
Micro-enterprise- 10 staff or less, turnover or balance sheet under 2m EUR.
Small business (not micro)- less than 50 employees, turnover less than £6.5 or balance sheet under £5m
What is the process for complaints to the FOS?
Attempt local resolution
Wait for final resolution or 8 weeks.
Complain to FOS within 6 months (most cases)
Should be within 6 years of incident or 3 years if later.
What are the limits for compensation from the FOS?
Complaints made after 1st April 2024
£430,000
Plus interest
Plus costs
Plus, interest on costs
Above this advisory only and only binding to the above level.
Can also direct regulated business to do something. E.g pay a claim
Are the FOS’s powers binding?
Binding on the provider
Not binding on the compliantlant who can take it to court instead.
What complaints does the pension ombudsman handle?
Complaints relating to pension schemes, the pension protection fund, and financial assistance scheme administration.
What does the TPO not handle?
Matters relating the state pension and other materrs handled by the FOS
What are the main areas of operation for the TPO?
Poor scheme administration
Unjustified delays
Failure to adhere to rules
Incorrect decisions
False information
Also, it helps resolve disputes between schemes, trustees, and administrators of schemes.
Who are the eligible complainants for the TPO?
Members
Widow(er)s
Creditors under divorce
Nominees
How are the powers of TPO handled?
Their decisions are binding.
What protects DB pensions?
The pension protection fund
How is the pension protection fund funded?
Through the Scheme Based Levy and the Risk-based Levy. (Bigger higher risk pay more)
What criteria must be met to transfer a scheme to the pension protection fund?
Employer is insovent, and the scheme is underfunded
Or
Fraud or other financial crime has resulted in loss of funds to a scheme.
Must be DB
Can not have comenced wind up before april 2005
No chance of the employer recovering financially
How long is the PFF assessment period?
Up to 2 years.
What happens to members during the PFF assessment period?
No new members
Existing members accrue no more benefits
Payments are still made to members receiving, subject to PFF max limit
What happens to transfers in the PFF assement
Usually banned unless already instructed and paperwork complete.
What will be considered during the PFF assessment?
Management of the scheme
Valuation in order size of shortfall compared to buying out the PFF level of benefits with an insurance company.
What considerations will be given to recent scheme changes during PFF assement?
Do they worsen the funding position and potentially require unwinding.
What is the limit for PFF payments to members and dependants either receiving payments or not.
Pensions in payment honoured in full. (Members and dependants)
Other members 90% of pension.
What are the limits to PFF on survivors benefits
-50% spouse only
-25% per child to max 50% in addition to spouse.
-25% perching to max 100% no spouse
Who is considered a child?
Under 18 or under 23 if in full-time education or disabled
What will defered benefits be revalued to for PPF?
Pre April 2009 CPI to 5%
Posr CPI to 2.5%
What will the payment benefits be revalued to under PPF
Pre April 1997, no increase
Post CPI to 2.5%
When will trivial commutation (ability to take all benefits as a lump sum) be allowed under PPF?
Permitted over 55 years old but under 75.
Overall benefits must be under £30,000
Who is the financial assistance scheme for?
Schemes where the employer became insovent before 2005
Or
Started winding up between 1 Jan 1997 and 5 Apr 2005.
Scheme must be underfunded
What has happened yo the FAS?
No new notifications or qualifications since September 2016.
Still around for people receiving benefits or with defered benefits
Winding up soon as PPF taking over.
How is the FAS paid?
Paid to top up pension payment from scheme to a maximum of 90% of the benefits accrued before the scheme started winding up/employer became insovent subject to a maximum cap.
Dependants usually 50% of members entitlement
How are payments for FAS increased?
Pensions in payment with CPI to 2.5% for post-April 1997
Between wind up and drawing benefits - RPI to 5% between wind up and March 2011 and 5% thereafter.
Who has to offer workplace pensions?
All employers as of 2019 on their staging day.
Was rolled out on a phased basis.
Who is an eligible job holder?
Between 22 to state pension age and earning more than £10,000 auto.
These people are auto enrolled into workplace pensions
Who is a non-eligible jobholders?
People outside of the eligible jobholder parameters that earn more than the lower earnings limit for NIC.
(£6,240)
Who is an entitled worker?
Someone who can not opt into the workplace pension as they earn less than the lower earnings threshold.
Must be offered a the right to join a pension of some kind
How can an employee opt out of a workplace pension?
Sends an opt-out notice (usually from the scheme) within one month of joining or getting info about the scheme. (Later of the 2)
Later than this period, it becomes scheme leaver and scheme rules apply.
What happens to contributions made if someone opts out of a work place pension?
They are sent back LESS TAX
When is an opted-out employee re-enrolled?
Every 3 years, if they are still eligible.
What are the employer requirements for eligible jobholder with workplace pensions?
Must auto-enroll and have contributions made on their behalf subject yo opt-out.
What are the employer requirements for non-eligible jobholder with workplace pensions?
Must be given information about the scheme and allowed to opt-in.
Must be allowed to opt-out later.
Contributions from employers must continue for opt-outs
What are the employer requirements entitled workers regarding workplace pensions?
Must be given information about the scheme go which they are entitled.
No contributions are required for the employer.
What is the time frame for informing an employee that they have been enrolled in a workplace pension and giving them relevant information?
6 weeks
How long is the employee assessment/defferal period for a workplace pension?
Up to 3 months
Employee has the right to opt-in in this time.
When are employer responsibilities suspended for workplace pensions?
If the employee is subject to a form of transitional protection against the lifetime allowanceand this would be damaged by auto-enrollment.
If the employee has notice to leave.
How much needs to be paid by each party for workplace pensions under qualifying earnings?
Employer 3%
Employee 4%
1% tax relief
8% total
What are considered qualifying earnings for workplace pensions?
Salary, overtime, commission, and other payments that fall between £6240 and £50,270
Whatratea of payment will be required under alternative definitions for earnings on workplace pensions?
Tier one - 9% overall, employer pays 4%
Tier two - 8% overall, employer pays 3%, pensionable pay must cover 85%
Tier three - minimum overall 7% of all earnings, 3% from employer
What can an employee do if they want to pay less of a contribution to a workplace pension?
Opt-out and re-enrol at the lower contribution level.
What is salary sacrifice?
Individuals sacrificing some of their total salary by the amount of gross pension contribution. Meaning in addition to tax relief, them and the employer also get NIC relief
Qualifying earnings in this case is post sacrifice.
What are the 3 main workplace pension schemes?
NEST
NOW:Pensions
The people’s pension
What is NEST?
The national employment savings trust.
efault pension option set up by the government.
How much are the charges for NEST?
0.3% per annum plus 1.8% per contribution.
What is the total amount of funds within NEST
6
What is the default fund within NEST?
Target date fund. (Moves funds to safer investments near retirement)
What are the rules for contributions into NEST?
Since April 2017, there are no minimum amounts of contributions, and transfers in of more than £50 are permitted.
Who runs NOW:pensions?
A company set up by the Danish government
What are the charges for NOW:pensions?
0.3% per annum. No contribution charge.
£1.50 admin charge per month.
Who runs the people’s pension?
A non-profit organisation, originally clfor the construction industry.
What is the charge for the people’s pension?
0.5% per annum
How many funds does the people’s pension have?
3 risk-profiled investment options and 7 individual funds
Name 6 typical pension scams
Cold calls/messages offering free reviews/one-off investment opportunities.
Marketing materials offering investment opportunities in excess of 8%
Paperwork delivered to members door with requirment for immidiate signature
Transferring pension funds into single investments.
Claims that members can access pension benefits before 55
Overseas pension fund opportunities
Whi should you call if you think you’ve been scamed?
Action fraud
What should you do if a client insists on proceeding with something you believe is a scam?
Call action fraud
What 3 ways can pensions be taken into account in divorce?
Offsetting
Earmarking
Sharing
What is offseting in regards to devorce
When the pension holder keeps the pension and the spouse gets marital assets to offset this.
What is earmarking in regards to divorce?
Allows for orders to be placed against the pension holders pension in favour of their ex-spouse. (Cash, income, or both) to receive when pension comes into payment.
What are the issues with earmarking?
Scheme members control timing and investment
Tax is on scheme members’ marginal tax rate, so it may be high for ex spouse.
Income (not lump sums) cease upon remarriage for ex partner.
Ex spouse will no longer benefit from the pension after the divorce.
There is no clean break in the divorce as spouses remain connected
What is sharing in regards to divorce?
When the pension fund of the member is split at divorce. Part of it then becomes the ex-spouses to do with as they will.
The majority have a transfer value to be sent to the ex-spouses scheme of choice. (Not DB pensions)
What does an ex spouse become in a shared pension arrangement for a DB pension?
Shadow membership
What is the requirement for pension splitting amounts?
There is none. The court decides
What can be shared for the state pension?
SERPS and SP2 additional state pension
Protected payments for the single tier.
Basic single tier cannot, neither can the state graduated pension
What are sharing orders expresses as?
Percentages
What is used to find the value of a DB scheme?
CETV - cash equivalent transfer value
What does pension sharing do to the members rights and the ex spouses
Creates a debt within the members and a credit within the spouses
What does the equality act prevent regarding age?
Discrimination on age besides for state pensions or if it can be objectively justifies.
What forms of age discrimination are there?
Direct - clearly related
Indirect - looks neutral but has a knock-on effect
What is a permissable waiting period for a member of staff to become eligible for a pension scheme besides auto-enrollment?
5 years
What pensions are considered in bankruptcy?
Generally, only pensions that are in payment and not state pensions.
This is with the exception of the guaranteed minimum pension for DB.
What happens to income from benefits in bankruptcy?
They are subject to an income payments order requiring income be handed over to the trustee in bankruptcy for up to 3 years.
