Contributions
What is the minimum contribution required for Auto-Enrolment?
8% (5% employee, 3% employer)
Name me the two most common DB options...
1- 25% TFC and reduced pension
2- Full annual pension
What does CETV stand for?
Cash Equivalent Transfer Value
Who takes the investment risk in a DC and DB pension?
DC employer
True or False?
A DB pension member can choose to cash in their entire pension at age 55.
False.
DB pensions provide set incomes and do not allow full cash withdrawals.
Unless triv com is applicable or they Transfer out.
In a DB pension, who primarily contributes to the pooled fund?
The employer
What is Triv com?
Triv com is applicable when all uncrystallised pensions added together are valued less than 30k -they can take pension as cash (25% will TFC).
There will be a 12 month window to claim any applicable pension.
Pension value is 31k....
Do they need financial advice?
No - DC members do not need financial advise
What is the primary goal of pooled funds in a DB scheme?
To generate sufficient returns to meet pension liabilities.
True or False.
In a DC pension the employer guarantees a fixed retirement income.
False
The retirement income depends on contributions and investment performance
How do Additional Voluntary Contributions (AVCs) impact a DB pension?
They can be used to increase pension benefits or tax-free lump sum
What is the main difference between taking an annuity and using a drawdown?
An annuity provides a fixed income for life while drawdown allows flexible withdrawals
What form do we need in order for us to speak to an RS?
We need the RS warranty and discharge form.
Name two types of assets a pension scheme might invest in.
Equities, Bonds, Property, etc....
True or false
A DB pension must allow you to retire at age 55.
False
It depends on the scheme rules.
Some schemes may not allow it or it may be subject to trustee consent
What happens if an employer misses a pension contribution deadline?
It must be reported to The Pensions Regulator and may lead to fines.
Someone is looking to claim their pension as cash.
Their pension is DB and vale is 25k.
Can they do it?
Maybe: Depends on other pensions they have and the value of those other pensions...
Triv com may be an option
Member wants to transfer out from a DB to a DC.
What would you advise?
Advise we can issue a TV
- Check scheme rules: How many they can have per year?
- Advise they are guaranteed for three months from issue...
- If over 30k: need to seek financial advice.
- Of course need to give SLA :)
If a member calls and asks what their DB pension fund is invested in what would you advise?
- Pooled funds
- Its employers responsibility
- You would not be able to advise on what fund is invested in
- If insistent: book a job :)
True or False?
Every Year Members will get a pension increase.
It will be applied to their whole pension...
False.
It depends on the pension element.
Some of the pension may increase while other elements may not increase.
What do we mean by the Accrual rate?
How much of your salary you earn per year of service. It is decided by the trustees and used in calcs.
What does Contracting out mean?
Contracting out:
- Not paying into the state pension top up.
- Instead paying into occupational pension: Occupational pension has to pay the GMP when you reach SPA.
What is the regulatory transfer-out timeframe for DC pensions?
Must be completed within 6 months of request.
A DB pension scheme has gone bust (collapsed) what happens to its members?
Their are a few things that could happen.
But mainly we need to understand that their is a protection put in place call Pension Protection Fund.
If a DB pension goes bust then they will step and pay the members - It will be a reduced amount to what they were promised.
True or false.
All DB pension schemes must offer inflation-linked inceases.
False.
Increases depend on scheme rules and are not all inflation linked.