Section 7 (49-56)

Question 1

Outline the conditions that must be met in order for a member of a defined benefit scheme
to have a statutory right to transfer their safeguarded benefits.

Answer 1

• Must not have made a request in last 12 months
• Must have ceased accrual/be a deferred member
• Make a formal application for transfer after receiving their statement of entitlement
• Request must be made at least 1 year before scheme’s normal pension age
• Must transfer all benefits (except GMP)

Question 2

George has accepted a cash equivalent transfer of £495,000 from his former employer’s defined
benefit scheme. Explain what evidence he must provide to the scheme trustees to prove he has
received appropriate independent advice.

Answer 2

• Written confirmation from adviser to George
• Confirm advice provided was specific to the transaction and that the adviser had appropriate permissions to advise on transfer of safeguarded benefits
• FCA number and George’s name
• Confirm name of ceding scheme

Question 3

What are GMPs?

Answer 3

• GMP for contracted out benefits accrued before April 1997.
• Members who were contracted out between April 1978 and April 1997 build up an entitlement
• In return for reduced employer and employee NICs, the trustees had to provide a minimum level of pension at least equivalent to the additional state pension that was given up.
• Value confirmed at date of leaving the scheme and revalued between date of leaving scheme and retirement
• Contracting out was abolished in April 2016

Question 4

What are the statutory increases to pensions in payment for those reaching SPA before April 2016?
(Learn the table)

Answer 4

• Pre-1988 GMP: state is responsible for paying the increases to the GMP in payment
• GMP between 1988-1997: CPI max 3% (excess is paid for by state)
• Non GMP before 1997: no requirement
• 1997-2005: CPI max 5%
• Post 2005: CPI max 2.5%

Question 5

What are the statutory increases to pensions in payment for those reaching SPA after April 2016?
(Learn the table)

Answer 5

• Pre-1988 GMP: scheme doesn’t have to provide escalation
• GMP between 1988-1997: CPI max 3%
• Non GMP before 1997: no requirement
• 1997-2005: CPI max 5%
• Post 2005: CPI max 2.5%

Question 6

What are the statutory rate of revaluation?

Answer 6

• Pre-1997 GMP: valued at date of leaving service
• Pre-1997 excess: CPI capped at 5%
• Pre-2009: CPI capped at 5%
• Post 2009: CPI capped at 2.5%

Question 7

What are the compensation levels for the PPF?

Answer 7

• Members who have reached NRA: 100%
• Members already in payment: 100%
• Members who have retired but yet to take benefits/or deferred: 90% subject to cap of £39,006.18 (so max £35,105.56 pa). Cap is reduce in line with members age if paid before 65
• Survivor: 50% member’s PPF entitlement
• One child: 25% member’s PPF entitlement, two children 50%
• Ill health members: up to 100% (case by case)

Question 8

Rates of revaluation of deferred benefits within PPF

Answer 8

• Pre 2009: CPI capped at 5%

- Post 2009: CPI capped at 2.5%

Question 9

Rates of escalation of benefits in payment from PPF

Answer 9

• Pre 1997: no increases

- Post 1997: CPI capped at 2.5%