Section 10 (73-80) Flashcards
Outline the FCAs requirement’s for a ‘two adviser model’
- Both firms must work together to collect information required to provide transfer advice and associated investment advice
- Must undertake risk profiling that assesses attitude to investment and transfer risk
- Consider impact of loss of safeguarded benefits on client’s ability to take
- Client must understand role of both firms/charges of both firm and how to make a complaint at each firm.
Outline the requirements the FCA places on a firm when advising a self-investor
- Full information about receiving scheme and planned investments
- If he cannot/will not provide information, the firm cannot offer advice.
- If the advice is not to transfer specifically because of the destination, the adviser must explain that the transfer may be suitable if he selects a different scheme.
Factors the FCA requires an adviser to take into account when determining a client’s attitude to transfer risk
- Risks and benefits of staying in the ceding arrangement
- Risks and benefits of the receiving scheme
- Attitude to certainty of income in retirement
- Whether the client would like to access funds in unplanned way and the impact this could have on sustainability
- Client’s attitude to and experience of managing investments and paying for advice
- Clients attitude to restrictions of ceding arrangement
Outline factors the scheme trustees will have taken into account in developing a recovery plan
- The contingent security provided by the employer, including its value term and enforceability
- Likely benefits available to members if employer suffers insolvency event in the short term.
- Any changes to membership profile that would significantly affect funding
- Impact of recovery plan on the employer and plans for sustainable growth
- Assumptions used and the impact is assumptions used are not borne out of practice
- Anticipated level of risk-based element on the PPF levy
Outline the conditions that must be met if the trustees wish to pay a transfer value in an assessment period
- Member must have requested a transfer value before entering the assessment period (in writing)
- Designated a scheme willing to accept the transfer
- Trustees reduce the payment to the amount needed to secure the member’s PPF level of benefits
Under what circumstances can a scheme enter the PPF?
- Firm must suffer an insolvency event and have no chance of being rescued
- Scheme assets must be insufficient to secure benefits on wind up at least equal to those payable under PPF
Q15/16/19 (b and c)/22
Revaluation/PPF rates etc
Mike, aged 63, was a member of a contracted-out defined benefit scheme between 1978 and
1998. He transferred these benefits into a section 32 contract in 1999.
Mike is interested in transferring these benefits in order to access them flexibly. The only
information he has on the policy is that the value of the GMP at the point the policy was set up
was £697.02 per annum and the policy is wholly invested in a with profits fund.
Identify the additional information you would require in respect of the section 32 policy before
you can provide any advice to Mike.
- What is the transfer value/does the value cover the GMP/will the provider permit the funds to be transferred?
- What is the revalued GMP at 65?
- How much PCLS is available?
- Performance of with profits funds/bonus history
- Do the contract terms allow the fund to be switched?
- Charges
- Are there any other guarantees?
Ursula, aged 59, wishes to transfer a number pension contracts in order to access these flexibly.
One of these contracts is an uncrystallised retirement annuity contract (RAC).
Explain why she has been told that she must receive advice from a pension transfer specialist if
she wishes to transfer the RAC.
The value of the RAC is greater than £30k and the contract includes GARs/safeguarded benefits. The PTS must provide advice because on or more of her other contracts includes GMP or is from a final salary scheme.
Question 26-29. Case study/death benefit questions
Practice
Question 31-36.
Practice
