Section 6 (41-48)

Question 1

When can a member take early retirement through ill health?

Answer 1

• May be available before age 55 depending on the severity of the condition. The trustees have discretion to pay full unreduced benefits (enhanced benefits only likely to be available for active members)
• Scheme administrator receives medical advice
• Medical advice confirms that member is unable to carry out occupation
• As a result the member has ceased their occupation
• Member receiving the pension will have the options to take PCLS in the normal way

Serious ill health - the member may be able to commute a cash lump sum

Question 2

Which statutory instrument defines the regulated activity for advising on the transfer of safeguarded benefits?

Answer 2

FSMA 2000

Question 3

Risk factors the FCA would expect firms to consider when establishing the risk warning appropriate for a consumer considering transferring their benefits from a DB scheme

Answer 3

• Health
• Loss of any guarantees
• Whether the client has partner/dependents
• Inflation
• Whether the client has shopped around
• Sustainability of income
• Tax implications
• Charges
• Impact on means tested benefits
• Debt

Question 4

What is the statutory definition of safeguarded benefits?

Answer 4

Any benefits which are not money purchase or cash balance benefits

Question 5

Where would you find the regulatory requirements which relate to pension transfer advice?

Answer 5

FCA Handbook

Question 6

List the 6 steps in the advice process

Answer 6

1. Establish and defined client relationship
2. Gather client data and determine goals/expectations
3. Analyse and evaluate client’s financial status
4. Develop and present financial plan
5. Implementation of the recommendation
6. Monitor and review

Question 7

Explain what information can be obtained from an income/expenditure analysis in relation to pension transfer advice?

Answer 7

• Establish a client’s basic income need pre/post retirement
• Can the client save further for retirement
• Identify expenditure that will cease on retirement

Question 8

A member of a defined benefit scheme has applied for a Statement of Entitlement and the
trustees have informed them that they must obtain appropriate independent advice.
Explain what is meant by the term ‘appropriate independent advice’, and why the member
is required to seek this.

Answer 8

• Appropriately qualified and authorised firm
• Independent of the trustees
• CETV more than £30k, before reductions for scheme underfunding are applied