R04 Flashcards
(223 cards)
1
Q
Autoenrolment introduced when? Single SP?
A
2012
2016
2
Q
Pension Minimum Funding?
PPF formed?
A
1995
2004
3
Q
A-Day?
Main Changes?
A
04/2006
ATAC
- Allowances: LTA, AA
- Tax Regime simplified
- Annuity Avoidance/Alternatives
-Concurrency: Personal & Occupational
4
Q
Annuities increase by 3% for each?
A
+30 basis points in GILTs
5
Q
Financial Advice exempt from IT/NICs up to?
Pensions advice allowance?
A
£500
£500, on max x3 occasions
6
Q
DB Pension benefits depend on?
A
Time Served
Renumeration
Accrual Rate
7
Q
Tax regime for ‘registered schemes outlined in?
A
Pensions Tax Manual
8
Q
To qualify for tax relief must be?
A
<75 +
Relevant Earnings
Resident in UK (Or prior 5yrs)
9
Q
Net Pay Method?
A
PCs before IT deducted (IT on ‘Net’ amount)
10
Q
Relief at Source?
A
PCs paid after BR tax, further relief claimed for HR/AR
11
Q
Self-Ax Tax deadlines?
A
End of Jan: 50% prev years
End of July: 50% prev years
Following End of jan: Balancing Payment for actual liability vs x2 payments on account.
12
Q
Salary Sacrifice useful as?
A
Reduced NICs, could be recycled. May return allowances.
13
Q
General Recycling PCLS rules?
A
Subsequent higher PC, or, additional PCs >30% PCLS.
Pre-Planned
PCLS + Prev PCLSs in 12 mths >£7500 since 2015 (1% SLA Pre-2015)
14
Q
6 PCLS Recycling Rules?
A
- Receives PCLS
- PCLSs >£7500
- PCs in 12 mths >30% PCLS
- Paid by Individual/Employer/Party
- PCs >Expected due to PCLS
- Pre-Planned
15
Q
PCLS Recycling: Additional PCs exceeds 30% PCLS terms?
A
Relevant Tax year + 2yrs Pre- and Post-PCLS
16
Q
PCLS Recycling: PCs greater than expected terms?
A
Does not count if individual does not have control e.g. employer increases PCs across the board.
17
Q
Spreading of large ‘non-regular’ employer PCs if?
A
- If >210% vs prev chargeable period.
- Relevant excess (XS over 110% prev chargeable period) is >£500,000
18
Q
Employer PCs: ‘Relevant Excess’ spreading periods?
A
£0.5-£1m: 2 Accounting Periods
£1-£2m: 3 APs
>£2m: 4 APs
19
Q
Annual Allowance?
Carry forward?
Tapering rules?
A
£60k
3yrs
Adjusted Income >£260k: Reduced by £1 for every £2, to £10k (£360k)
Threshold income: Full AA if <£200k
20
Q
AA: ADjusted Income?
ThreSHOld Income?
Protects who?
In order to taper which tests must fail?
LS Death Benefits?
A
Total income + PCs (ADd ER PCs)
Total income - PCs + SS (SHO SS Arrangements)
‘Lower’ salaries with spikes in PCs
Both
Included in Gross income but subtracted in ANI/TI Calcs
21
Q
Charge for exceeding AA?
A
Marginal rate on higher of:
- Default Chargeable Amount: Pension input in to all schemes
- Alternative Chargeable Amount: DB schemes - Alternative AA
22
Q
AA: Elect for scheme pays if?
With?
Tapered AA/MPAA taken into account?
A
> £60k (Even if tapered/MPAA)
£2k
Relevant reduction in pension.
No
23
Q
Result of MPAA being triggered?
A
Only £10k in to DC scheme.
Keep £60k AA - for DBs.
No carry forward.
24
Q
MPAA triggered when?
A
Pension flexibly accessed:
- UFPLS
- FAD
- Flexi-Annuity
- Exceeding Cap on Capped Drawdown
25
MPAA not triggered when?
TFC
'Secure income': DB/Annuity
Capped Drawdown
Small Pots
Survivors Pensions
26
MPAA tiggered at:
1. Start + Subsequent <£4k?
2. Start + Subsequent >£4k?
3. Later?
1. Standard AA.
2. Alt AA £50k (AA-MPAA). Savings tested against MPAA not AA.
3. DC input after date tested against MPAA
- DC As per Contributions
- DB As per time
27
DC savings exceed MPAA?
Higher of?
Default Chargeable Amount: Input - AA
Alternative Chargeable Amount: (DB-Alt AA) + (DC-MPAA)
28
Working out DB PCs?
'Pension Input Amount': Closing Value - Opening Value
29
DB AA: Opening Value? Closing Value?
O: Pension x 16 x CPI
C: Yrs Pension Increase x 16
30
LSDB when member dies >75?
Taxed at marginal rate.
31
AA for pre-2015 'Flexible Drawdown' converted to FADs?
Usual AA, but with £10,000 limit to DC input.
32
Pre-24 if exceeded LTA?
25% charge on XS used for income
55% charge on XS used for LS
33
LTA: Benefits paying Pre-A Day tested how?
'Flexible Drawdown' after 2014?
Capped after 2015?
25x Yrly pension at first BCE.
25x 80% Max Yrly Pension (Max Capped amount 150% GAD Basis)
34
'Two year window' applies to?
When death benefits must be 'designated' to income.
35
Normal pension age? Increases to?
55
58
36
Commuting Pensions for Cash:
Small Pots?
DB Schemes can use?
Occupational Schemes
Small Pot LS <£10k
Trivial Commutation LS <£30k
Winding-Up LS
37
Small Pot rules?
PPs: Arrangement <£10k, Stop all rights under arrangement, Payable up to x3.
Occ Ps: SCHEME <£10k, No Limit to use, No Transfers out within 3yrs
38
Can take trivial commutation LS if ? <£30k
DB arrangements, IPMPISP
39
Tax of:
Small Pots?
Trivial?
SP: Crystallised as income, Uncrystallised as 25% TFC, 75% income.
Trivial: 25% TFC, 75% income
- If Scheme Pensions: as income
40
Scheme pension from DC only triggers MPAA if?
<11 others entitled
41
PAYE on Flexible Payments usually starts with?
'Month One' basis: taxed as a monthly payment e.g. 1/12th BR Band.
42
'Unused Funds' are?
Funds not crystallised by age 75, may have been LTA tested.
43
Pension/Annuity Protection LS Death Benefit?
Pension x20, or, Lifetime Annuity Amount
44
Trust Special LS Death Benefit Charge?
45%
45
What are Retirement Annuity Contracts?
Personal Pension Plans starting pre-1988.
46
Main benefits of Small Pots Payment?
Does not trigger MPAA.
Was never tested against the MPAA.
47
Primary Protection?
DB value?
Can still contribute?
Deadline for application?
Protects against LTA if >£1.5m in 2006 (Allows 25% £1.5m)
20:1 (Though 25:1 if in payment)
Yes
2009
48
Primary Protection Factor? Calculated how?
% by which benefits exceed £1.5m.
(Value-£1.5m)/£1.5m x ‘Underpinned LTA’ (£1.8m)
49
How to work out Primary Protection amount?
PPF x Underpinned LTA (£1.8m)
50
Enhanced Protection?
Ongoing PCs?
Deadline?
No min on A day.
No further PCs.
25% of £1.5m
2009
BEST TYPE
51
Types of protection?
Fixed x3
Individual x2
Primary
Enhanced
Scheme Specific
52
Scheme Specific LS Protection?
>25% LS Rights on A Day, automatically protected.
Lost if transferred (Unless block).
Lost if does partial crystallisation.
53
Primary /Enhanced+ LS Protection?
Expressed as?
LS Rights on A Day >£375k
and
Primary: Monetary Amount
Enhanced: %
54
Fixed Protections?
Ongoing PCs?
Deadlines?
No ongoing PCs.
FP12: £1.8m - 2012
FP14: £1.5m - 2014
FP16: £1.25 - None, but no further PCs
55
Individual Protections? Ongoing PCs?
Funds above Standard LTA on date. Protected to lower of pension savings or max level.
Yes
IP14 - Min £1.25 - Prot £1.5m - 2017 Deadline
IP16 - Min £1m - Prot £1.25 - None
56
How does splitting/sharing affect Primary Protection?
Pension Debit subtracted from Pension. If new LTA <£1.5m, protection lost.
57
What is Alternative Annual Allowance?
If both DB + DC member: can pay in MPAA to DC, then up to £60k to DB accrual.
58
BCE:
- 1?
- 2?
- 6?
- 8?
1: Drawdown
2: Scheme
6: Lump Sum
8: Transferring Overseas
59
Valuation for DC BCE?
DC benefits after 06/04/06:
- Valued as fund value brought in to payment
- Drawdown for Annuity/at 75: original allocation to drawdown deducted from current cash value (Therefore only growth tested, preventing double testing)
60
Valuation for DB BCE?
- Prior to A day?
- Since?
x25 pension in payment
Use factor of 20 e.g. £20,000 x20 = £400,000
61
Valuation for BCE against LTA: Capped drawdown?
Value is 25 x 80% of Max Income
62
Current Pension allowances?
LSA: £268,275
LSDBA: £1,073,100 (Minus any LSA used)
OTA: 25% on benefits exceeding £1,073,100 when transferred overseas
63
LSA if:
- Used 100% already prior to 06/04/24?
- Used only part?
- None available to them
- LSA reduced by 25% of amount of LTA used previously (Usually £1,073,100)
64
LSDBA if:
- Used 100% prior to 06/04/24?
- Used only part?
- None available
- LSDBA reduced by 25% of %LTA used
65
Serious Ill-Health Early Retirement (SIHLS):
<75?
>75?
Tax-free up to LSDBA
Marginal Rate via PAYE
66
Protected Retirement Age?
If in place by A-day.
Prior to LTA Abolition - LTA reduced by 2.5%/yr before 55.
67
2028 protection?
If have 'Unqualified Right' to take benefits at 55.
68
What is a successor?
Nominated by dependent/nominee to continue to receive flexi-access drawdown.
69
Significance of time after death to designated death benefits?
Two years.
If >2yrs; benefits taxed on recipient regardless of age of member at death.
70
Uncrystallised DC funds on death:
- <75, within 2yr window?
- >75/Outside 2yrs?
Tax free. LS tested against LSDBA. XS at marginal rate.
At marginate rate.
71
DB death benefits?
LS: Tax-free up to LSDBA. XS at MR.
Income: Guarantee Period/Dependant's pension. Taxed at MR.
72
DC Crystallised death benefits?
1. Lifetime Annuity?
2. Drawdown?
Tax Rx?
1. Guarantee Period, APLS, Survivors regardless of age
2. Nominee/Successor takes as LS/Annuity/FAD
<75: LS against LSDBA, XS at MR. Income tax free.
>75: LS/Income at MR
73
Transitional Tax-Free Amount Certificate (TTFAC) requirements?
Before first RBCE after 06/04/24.
If can evidence previously taken LSs.
Scheme has 3 mths to provide/decline.
74
Charges?
1. Unauthorised Payment Charge?
2. Unauthorised Payment Surcharge?
3. Scheme Sanction Charge?
4. Deregistration Charge?
1. For 'Unauthorised Payment': 40% of unauthorised payment
2. If exceeds 25% Members rights: Additional 15%
3. Paid by Scheme: Around 15% of unauthorised payment
4. If chargeable events across any 12 mth period exceeds 25%: tax charge of 40% on deregistration
75
Overseas schemes rules?
Flexibly access RNUKS; MPAA triggered.
UFPLS equivalents; taxed as income.
Limit of £100k covering payments from registered/overseas schemes.
25% Overseas transfer tax to any QROPS transfer exceeding OTA
76
Lump Sum Allowance is?
£268,275 - Prev L.S.s taken
77
LSDBA is?
£1,073,100 - Previous Lump sums taken
78
How do you calculate TFC allowance?
If taken benefits before 06/04/24?
25% of LTA, or, Protected LTA.
'Standard': LSA - (25% x %prev LTA Used x current LTA)
TTFAC: LSA - Prev TFC
79
Since 2017, any pension received whilst Non-Resident for period of >10yrs will be taxed on return if?
Relevant Withrawals >£100k
80
Overseas Transfer Allowance is?
Same as LSA/LSDBA. benefits in XS: subject to 25% tax.
81
If scheme pension paid to <12 members what happens?
MPAA triggered.
82
DB PCLS must be taken when?
6mths pre- to 12mths post- income starting.
83
Scheme Pension rules?
At least annually.
Guarantee Period <10yrs.
Cannot decrease, unless limited circumstances
84
DB scheme death benefits?
Dependents SP
Guarantee Period
LS's:
-DBLS: Multiple of Salary
- Pension Protection LS: Difference between value/income
-Annuity Protection LS: Fund value toward annuity protection - income (LSDBA tested)
85
What is an 'Open Market Option'?
What affects annuity rates?
Ability to shop around for the best annuity rate.
GILT yields and Mortality
86
Shorter than average life expectancy annuities?
Enhanced - Lifestyle factors accounted for
Impaired - Health Conditions
87
When were Male/Female SPA equalised?
2010-2018
88
State Pension Age currently?
Rising to?
66
67 between 2026-2028
68 between 2044-2046
89
Annuity rates have decreased because?
Longer Life Expectancy
Lower GILT Yields
90
Financial Advice costs not treated as BiK up to? If in XS?
Maximum?
£500 per year. Any XS taxed as per IT/NIC.
x3 Payments in members lifetime.
91
S.P.A prior to 2016 might receive?
BSP +/-
SGPS '61-'75
SERPS '78-'02
S2P '02
92
Exempt years from Total Pension Input?
PCs in tax year of death
PCs in tax year of severe ill health
93
How were benefits valued:
- Starting pre-A day?
- On/After A Day?
Annuity/Scheme Pension: x25
Capped DD/FAD 25x80% Max Amount
%LTA Applied
94
Pension Credit:
- Pre-2006:
- On/After 2006:
Pre: Interest Adj Pension Credit/LTA
Post: £1.8m x Pension Credit Factor
95
Relevant UK Individual?
UK earnings, or resident in UK
Resident at joining, and in 5 years
Crown employment with UK taxed earnings.
96
Valuation of previously drawn benefits?
Pre-A Day: Annuity/Scheme x25, Capped 25x80% Max Amount
Post A Day: Annuity/SP x20
97
Pension Debit is?
Pension Credit is?
Giving up pension rights.
Receiving pension rights.
98
How does Pension Credit work?
Already in Payment = 'Disqualifying Pension Credit': No TFC can be taken, LSA doesn't increase
2006-2024: Could apply for enhancement factor to increase LSDBA ('Pension Credit Factor') if came into payment after 2006 and was paying when sharing order made.
Pre '06: 'Pre-Commencement Pension Credit Factor'. Pension credit indexed to 2006/LTA. Increases LSA & LSDBA.
99
Does pension credit enhancement factor apply to TFC?
No
100
LDBA if received pension credit of £437,500 on divorce in 2009 (LTA £1.75m)?
£437,500/£1.75m
£1,073,100 + (0.25 x £1,073,100) = £1,341,375
101
Does Pension Credit/Debit affect
-Enhanced Protection?
-Primary Protection?
- Fixed Protection?
- Individual Protection?
No*
Credit: Depends When/Where Credit came from.
Debit: Recalculate Primary Protection Enhancement Factor.
No*
No*
102
NMPA increases?
'2028 Protection'
55, to 57 in 2028 so:
<1971 Unaffected
1971-1973: Window from 55th Birthday to take benefits, else wait until 57
>1973: Pension Benefits delayed by two years
- Unqualified right to take benefits on/before 04/11/2021
- Block Transfer (Two or more transferring)
- Transfers from Scheme with Protected Age
103
Early Pre-A Day rights?
LTA reduced by 2.5% each full year prior to NMPA.
104
Main difference between Enhanced and Primary protections?
Individual/Fixed Protection?
Enhanced: No further accrual up to 2023.
- Lost if RBCE/Transfer/New Pension prior to 2023.
Fixed like Enhanced
Individual like Primary
105
PCLS in:
- Primary protection?
- Enhanced Protection?
Primary:
- Unregistered: £375k
- Registered: Registered Amount x 1.2
Enhanced:
- Unregistered: £375k
- Registered: Capped at amount in 2023
106
Transfers overseas 'unauthorised payment' unless?
QROPS:
o Double Taxation Agreement with UK
o Regulated
o Provide similar Benefits to UK
Must remain so for 5 years.
107
OTA limits transfers to QROPS:
- How much is OTA?
- XS beyond taxed at?
- Same as LSDBA
- 25%
108
Temporary Non-Residence rules for RNUKS?
RNUKS contributions/transfers:
o Pre-2017: 5 Years
o On/Post 2017: 10 Years
-Only taxed in UK if Withdrawals >£100,000 (Excludes PCLS/UFPLS TFC)
109
TPR does what?
x3 main 'pillars'?
Regulates work-based pension schemes and auto-enrolment.
Gathering Info
Regulation & Enforcement
Acting Against Avoidance:
- Contribution Notices: 6 Years (N.O.T.I.C.E)
- Financial Support Directions: 2 Years
110
Acting Against Avoidance under TPR: What is 'Clearance Procedure'?
ERs confirming NOT subject to TPRs Anti-Avoidance
111
Who can authorise/De-authorise Master Trusts?
TPR
112
FOS does what? Who is eligible?
Resolves disputes.
Consumer, income <£6.5m, Trust <£5m, MicroEnterprise <2m euros, Small Business
113
Process for going through to FOS?
Business has 8wks to resolve.
The 6 months from business' final response letter to refer to FOS.
Must report within 6 years of event, or 3yrs before becoming aware.
114
Max money award from FOS?
Money Award: £445k since 2019, £200k pre-2019
115
Pensions Ombudsman does what?
Not for?
Financial limit?
Deals with 'maladministration' complaints.
State Pension/Sales or Marketing of Pensions.
No limit.
116
PPF for?
Funded through?
Pays out when?
Covers DB schemes wound up since when?
Insurance scheme for DB/Hybrid schemes.
Levies.
Insolvent & Underfunded, or Fraud.
2005.
117
PPF aim to complete assessment within?
What is a section 143 valuation?
Compensation limits?
2 years.
Cost of buying benefits with an insurance company.
100%: Reached NRA, Receiving Survivors Benefit
90%: Deferred + Not reached NRA
50%: Sole Spouse orChild benefits after insolvency
25%: Spouse AND Child (or x2 children)
118
Revaluation for PPF?
From Pensionable Service:
Deferred:
- Pre '09: CPI, Max 5%
- Post '09: CPI, Max 2.5%
In Payment:
- Pre '97: No Increase
- Post '97: CPI 2.5%
119
PPF Trivial Commutation LS payable if?
Within what window?
Reached NMPA
<75
£30k limit
1Yr
120
FAS is for what?
Pays what?
Financial limits to payments?
Lost benefits through insolvency but not covered by PPF due to:
- Underfunded DB member 1997-2005
- Wound Up and couldn’t repay
'Tops up' to 90% what pension member had accrued prior to wind up.
£45,455 + 3% each year >20yrs pensionable service
(Minimum 50% of accrued entitlement)
121
FAS Revaluation?
Pre-'11: RPI, Max 5%
Post '11: CPI, Max 5%
122
Jobholders:
- Eligible?
- Non-Eligible?
- Entitled?
Eligible: 22-SPA earning >£10,000 p.a.
- Auto-Enrolled: 6wk 'Joining Window'
Non-Eligible: Earn £6,240 to £10k. Outside age limits.
- 'Right to Opt in'
Entitled: <£6,240. ER does not have to contribute.
123
Min Contribution 'Sets'?
EE 4%, ER 3%, TR 1% ('Qualifying Earnings')
9% Pensionable Pay - ER at least 4%
8% Pensionable Pay: >85% Earnings (ERs at least 3%)
7% Earnings: All earnings
124
Opting out notice must be given within?
If miss this?
1mth from later of: Active Membership, Date receiving Enrolment Info
--> If invalid: Extended to 6wks
Leave as per scheme rules.
125
NEST Scheme info?
Retirement Date Fund, or choose from x5 further funds.
1.8%on PCs, then 0.3%/yr.
126
Peoples Pension info?
Annual £2.50 + 0.5% Mx Charge.
- Rebate of 0.1-0.3% on higher amounts.
Default x3 risk funds, or further x8 funds.
127
Pensions in Divorce:
Types?
How are they valued?
'SOE'
- Sharing: % division at divorce.
- Offsetting: Against other assets. Lose Pension/TFC/Death benefits.
- Earmarking: % benefits 'earmarked' so no clean break.
'Pot'/CETV, SERPS or NSP 'Protected Payments' valued by DWP
128
Age discrimination directive covered by?
Applies to?
Applies to benefits accrued since?
Equality Act 2010.
Occupational Schemes + ER PCs for Personal pensions.
2006
129
Treaty of Rome/Pensions Act 1995 does what?
'Equal pay for equal work'
130
Pensions Directive 2005 does what?
Taxation of UK pensions generally described as?
'Cross border scheme' if ER has workers in other EU state.
Exempt-Exempt-Taxed
131
Parental leave for:
- DB?
- DC?
DB: Accrual as per EE earnings before leave
DC: ER PCs as per EE earnings before leave, EE PCs as per leave earnings.
132
FSMA 2000 powers?
Fund Manager must be FCA authorised.
Recommend EEs join +/- AVCs.
Generic criticism of other schemes.
133
Insolvency:
- Creditor can petition for banruptcy if how much owed?
- Excluded property?
£5,000 collectively.
Employment & Basic Needs.
134
Welfare Reform & Pensions Act 1999 regarding bankruptcy?
Excludes pensions not in payment from estate.
Can apply to recover 'excessive contributions' for up to 5 years.
135
Which pension elements are:
- Excluded from estate?
- Unlikely to be subject to payments order?
- GMP: Excluded. If in payment 92B rights may be subject to payments order.
- State Benefits: Unlikely.
136
Income payments order only continue after discharge if courts direct - what is maximum?
3 Years
137
What is an integrated scheme?
Members pension reduces at State Pension Age.
138
Added Years highlights?
Suit those with quick salary increases.
Must be taken alongside other benefits.
139
Funding rate by DB schemes reviewed every?
3 Years
140
Summary of 'Contracting Out'?
No ASP (SERPS/S2P) - Scheme provided benefits instead
Between 1978-1997 - Guaranteed Minimum pensions (GMP)
141
Escalation of DB schemes?
o Pre-2011: RPI
o Post 2011: CPI
142
SPA Pre-2016 escalation for:
- GMP
- Non-GMP
- Pre-88 GMP: State responsible for paying escalation (not scheme) ('State '88')
- 88-97 GMP: Scheme escalates by CPI, max 3% (State covers beyond 3%)
- Pre-97 Non-GMP: No escalation
- 97-05 Pension: Must escalate by CPI to Max 5%
- 05 Post: Must escalate by CPI to Max 2.5%
143
SPA Post-2016 escalation for:
- GMP
- Non-GMP
- Pre-88 GMP: No escalation from scheme or state
- 88-97 GMP: Scheme escalates by CPI, max 3% (no state help)
- Pre-97 Non-GMP: No escalation
- 97-05 Pension: Must escalate by CPI to Max 5%
- 05 Post: Must escalate by CPI to Max 2.5%
144
Differences between SPA pre-'16 and post-'16?
Pre-'88 GMP: Lose escalation
Post-'88 (to '97) GMP: Lose cover from the State beyond 3%.
145
When entitled to the NSP?
Process?
Reaching SPA after 2016.
One-off Foundation amount calculated +/- reduction by 'rebate derived amount' if contracted out.
146
Incentive exercises regulated by? According to which principles?
TPR.
x5 Principles: Fair, Open, Conflicts of Interest Managed, Trustees Consulted, IFA ('FOCTI')
147
How to calculate PCLS?
25% of Value (Residual Pension x 20 + PCLS)
148
Can a GMP be commuted?
No
149
Formula for calculating PCLS if commuting?
20 x Pre-Commuted Pension x C)/
(20+(3xC))
150
Ongoing scheme valuations as per Pensions Act 2004?
Yearly Actuarial Valuations, extended to 3yrly if get actuarial reports yrly.
151
What is a schedule of contributions as per statutory funding objective?
15 month rule means?
Document detailing EEE/ER contributions to fund promised benefits.
Schedule of Contributions within 15months of actuarial valuation effective date.
152
Valuation Schemes?
- IAS 19?
- Insolvency Section 143?
- PPF Section 179
- IAS 19: Brings pensions onto balance sheet for transparency. Liabilities valued using AA-rated Bonds.
- Insolvency Section 143: Cost of insurance company buying scheme - valued by GILTs.
- PPF s179: Simpler. Used to set risk-based PPF levy.
153
Can trustees have a criminal record?
Yes, but no unspent convictions.
154
When must trustees report material late payment failure to TPR?
To Members?
Within 10 days.
Within 30 days.
155
How many trustees must be nominated by members?
Except?
At least 1/3rd.
One man schemes, small insured scheme, all trustees independent.
156
Early leavers:
DC?
DB?
If PCs refunded - tax liability?
DC <30 Days: Short Service Refunds.
DB 3mths-2yrs: CETV or Return of Contributions
>2yrs: Right to a deferred pension or CETV
20% on £20k, 50% beyond
157
Preserved Pension Statutory Revaluation?
If contracted out?
Not contracted out pre-16: Left pension
- 1986-90: Since 85 revalued by CPI, max 5%
- 1991-09: All revalued by CPI, max 5%
- Post-09: All revalued by CPI, max 2.5%
National Earnings, Fixed %, or 5%p.a. if 'Limited Revaluation Premium' paid (so state tops up).
158
Statutory right to transfer?
Flexible (i.e. DC): Any age if uncrystallised
Safeguarded (i.e. DB): Uncrystallised + Ceased Accrual + Statement of Entitlement +/- Before 1yr pre NPA
159
Transferring Safeguarded to flexible >£30k?
Process?
Since ’18: Need APTA with Transfer Value Comparator (TVC)
- 1 Mth: Notify need independent advice
- 3 Mths: Set Guarantee Date
- (10 Days of Guarantee Date: Give statement of Entitlement)
-(3 Mths of Guarantee Date: Written confirmation want to transfer
* With confirmation obtained independent advice
* Trustees check + Due Diligence on Receivign Scheme)
- 6 Mths: Trustee must transfer TV
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Assumptions used for TVC?
What does TVA assess?
AIR (Annuity Interest Rate)
RPI 3%
CPI 2%
AEI (Average Earnings Index) 3.5%
Annuity Expense Allowance 4%
Product Charges 0.4%
Annual return after charges to meet DB benefits
161
Charging for Transfer Value work?
Contingent Charging not allowed - same charge regardless of outcome.
'Carve outs' for those with Life Shortening Illnesses <75yrs, or Financial Difficulties (>3 missed payments in 6mths)
162
Advisers should prioritise which schemes to receive transfers?
Workplace Schemes
163
Which public schemes are LA run?
Only funded public sector scheme?
Police, Fire-fighters
LGPS
164
Accrual for Public Sector schemes?
Final Salary up to 2015.
CAE since.
165
Which DB schemes can transfer?
Private or LGPS.
166
Stakeholder highlights?
Accept any payment (except cash/card) with min PC <£20.
Max 1.5% for 10 yrs then 1%.
Must be offered lifestyling.
167
Stakeholder regulation?
Compliance --> TPR
Marketing, Funds --> FCA
168
SASS basics?
Up to 12 members, all must be trustees.
Can lend up to 50% net assets to sponsoring ER.
Regulated by TPR (SIPPS by FCA)
169
SMPI not required for?
Assumptions?
SASS/RACs.
Earnings/Inflation 2.5%
Retirement Expenses 4%
170
Annual Benefits Statements must be reviewed how often?
Every 5 years.
171
Legal bases for pensions?
Trust Based: DB, ER Sponsored
Contract Based: outsourced to 3rd party
172
Master trusts are designed for?
>2 unconnected private employers.
173
Charge controls for default DC Schemes?
0.75%
Flat fees cannot be charged under £100
174
Relevant Multi Employer Schemes must have how many trustees?
At least 3 trustees.
175
Independence Governance Committees for workplace schemes?
x5 Members, majority independent
176
When is a Serious Ill Health LS payable?
If life expectancy <1yr, paid ONLY out of uncrystallised funds
177
Pension contribution protection?
PC Insurance: For PPs/Stakeholders since 2001. Separate insurance contract. If claimed PCs limited to £3,600, deferred period of 26wks.
Waiver of PC: Paid directly to PPP before 2001. Since 2006 not eligible for tax relief.
178
Do income protection payments qualify for relevant earnings?
ER yes.
Personal no.
179
Small pots payments limits?
<£10,000:
- x3 from Non-Occupational Schemes
- Unlimited from Unconnected Occupational Schemes
180
Trivial Commutation rules?
From DB/IHMPIHSP
No previous Trivial Commutation LS.
ALL Pension benefits <£30k
181
Timeline for Trivial Commutation LS?
Payment must be made within 3mths of 'Nominated Date'.
Subsequent payments must be made within 'Commutation Period' of 1yr.
182
PCLS from Scheme pension must be paid?
Guarantee Period up to?
6mths pre- to 12mths -post.
10yrs ('term certain')
183
Scheme Pension with <11 members rule?
Taking pension triggers MPAA.
184
LS Death Benefits?
Limits?
DBLSDB: From DC pension. No Limit.
Pension protection LS: From DB Scheme Pension.
Annuity Protection LS:
- PPLS/APLS: Limited by Crystallised Amount - Paid out Amount
185
Does taking out a 'conventional' lifetime annuity trigger the MPAA?
No
186
Bounds of Flexible Annuity withdrawals?
120% of annual rate of a level annuity.
187
Limit to guarantee period on annuity?
No limit
(Was 10yrs prior to 2015)
188
How do GILTs affect Annuity Rates?
High Demand --> Price Increases/Yields Fall --> Falling Rates --> Lesser Annuity Rate
189
Cannot take an UFPLS if?
Primary protection or enhanced protection with registered tax-free cash rights
Disqualifying pension credit rights
Scheme Specific LS Protection without losing it (Unlike FAD)
190
How are Capped Drawdown withdrawals limited?
150% of Basis Amount (Equivalent Annuity).
Calculated using 15yr GILTs.
191
For Capped Drawdown what is the Reference Date?
Nominated Date?
When funds designated, basis amount calculated, and rx as 1st day of pension year.
Administrator must recalculate basis amount within 60 day window of 3yrly period.
192
Capped Drawdown: How long do basis amounts last for?
<75: 3yrs
>75: Annual Review Period at Start of Pension the Following Year
(If >1 arrangement - Annual reviews and aligne dpension years)
193
When must basis amount be recalculated outside of 3yrly reviews?
If >75.
If part of fund buys annuity/SP/FAD.
If divorce/additional funds (Then 60 day window doesn't apply)
194
Capped Drawdown: How can new funds be designated?
Does this trigger MPAA?
Into Existing Arrangement.
Does NOT trigger MPAA unless draw from Converted FAD.
195
Short term annuity lasts how long? How long can guarantee period be?
<5yrs.
<5yrs.
196
What is mortality gain?
Drag?
'Extra' funds from short-lived members used to enhance rates.
Extra return to make up for loss of mortality gain.
197
When must statement be provided re open market option?
2mths Pre Age 50, or if Ill Health LS requested.
4-6mths Pre Retirement Date. (With reminder 6 wks Pre-Retirement Date)
198
Critical Yields:
A?
B?
A: Iv returns required from drawdown to match AAAnnuity.
B: Iv returns required to provide selected income. ('BBBread').
199
BSP basics?
Cat B Pension?
Required 30yrs NICs, or receives 1/30th Amount.
Spouse reaching SPA with <18 yrs Qualifying Yrs ('Claiming spouses BSP based on their qualifying NICs/)
200
Can continue NICs/SP accrual on leaving UK for EU for how long?
2yrs
201
NSP: Starting Amount is?
Higher of:
Pre-'16 Entitlement: i.e. BSP+ASP benefits less any contracted out years (If >£155.65 --> 'Protected Payment')
Entitlement under NSP
202
Starting Amount:
- Low?
- Equal?
- Higher?
<£155.65: Add more yrs/NICs
- If 'Contracted Out' use 'Rebate Derived Amount'
=£155.65: Receive Full SP
>£155.65: Receive 'Protected Payment' indexed with CPI
203
Which NICs do not contribute towards State Pension entitlement?
Class 4 NICs
204
How far back can you pay NIC 3s for?
Payable for the past 6 years (Was extended for ’06-’16) as those were affected by change in SP
205
What were NIC3As?
Between ’15-’17 ‘topped up’ S.P (to build extra State Pension)
- Also 50% spousal pension
- Included for Benefits/Pension Sharing Order Ax
206
How is the additional state pension revalued?
CPI, NOT the triple lock.
207
S.P deferral if SPA pre-'16?
SPA Reached Pre-’16: Defers for 5wks --> 1% Higher Wkly pension
- Or a Lump-Sum Payment: Deferred Payments + Base Rate +2%
- Cannot push them into higher tax bracket
- Can subsequently defer income
- If dies during deferral Spouse inherits deferred benefits
208
S.P deferral if SPA post-'16?
Defers for 9wks --> 1% Higher Wkly pension
- Cannot take as a lump sum
- Spouse cannot inherit
209
Who is entitled to the annual increases in the S.P if overseas?
Taxattion?
UK for >6mths/yr
EEA (Country/Gibralter/Switzerland/Reciprocal Agreement)
Taxation:
- Non Residents with Double Taxation Agreement: Taxed in Resident Country
- No Double Tax Agreement: Pay UK +/- Other country tax
210
Bereavement Support Payment:
Claim within?
Eligible?
Amounts?
Paid if claimed within 3mths, or backdated by only 3 mths.
(>21mths --> No initial payment)
UK Claimant under SPA, or job related death.
Standard: Initial £2,500, then £100 for 18mths
Pregnant/Child benefit: Initial £3,500, then £350 for 18mths
- Ends if reaches SPA/Criminal Offence
211
Can you inherit SERPS/S2P?
Surviving Spouse could inherit up to:
- 100% of SERPS: Depending on DoB (Older the Deceased, More Inherited)
- 50% of S2P
212
What is & are components of Pension Credit Framework?
Tax-free means-tested welfare benefit.
Guarantee Credit: At Pension Credit Qualifying Age (Same as SPA)
- If Low --> Guarantee Credit Added:
* Single: Tops up to £227.10
* Joint: Tops up to £346.60
(Savings Credit: No longer available since ‘16
- still receive if already paying)
213
NEST Stages?
- Foundation: New members spend 5yrs in this phase
- Growth: 30yrs in this phase
- Consolidation: De-risking around 10yrs from retirement
214
Limits on SIPPs Iv in sponsoring companies?
o <5% Scheme Assets in one sponsoring employer
o <20% Scheme Assets if >1 sponsoring employer (Still <5%)
215
Limits on SIPPs loaning to sponsoring employers?
Minimum rate?
<50% Net Value of Schemes Assets
Minimum IR: Average of 6 clearing banks up to nearest 0.25% + 1%
216
If beneficiary nominated by benefits are then paid to another; how are they paid?
LS
217
ISA Additional Permitted Subscription: Greater of?
Value of Deceased’s ISA at Date of Death
Value at Earlier of:
- Completion of Estate
- Closure of Deceased’s ISA
- 3rd Anniversary of Date of Death
218
Formula for getting PCLS when commuting?
(20xPensionxCommutation) / (20+(3xC))
219
Early leavers: how long can you get PCs refunded for?
DC: 30 days
DB: 2yrs
220
Valuing benefits for commutation?
Income received at 2006: 25 x Income (Ignore TFC)
Income after 2006: Value x 20 + PCLS
221
Two main differences between:
- Scheme Pension?
- Lifetime Annuity?
Annuity has no limit on guarantee period (SP 10yrs).
If dies <75: Annuity payments tax free, SP taxed at survivors MR.
222
Additional requirements for Capped Drawdown transfer over a 'normal' pension transfer?
All funds transferred + To a new scheme (with no existing money in).
223
