Joining a DB scheme
What would a member be known as on the system after they have joined the pension scheme ?
An Active Member !
What does GMP stand for ?
Guaranteed Minimum Pension
Where do the members contibutions go ?
Into a pooled fund
What does AVC stand for ?
Additional Voluntary Contributions
What would a member be known as on the system when they leave a DB scheme ?
Preserved or Deferred member
Can someone join the scheme if they do not work for the company ?
No, they have to work for the company to pay into the pension scheme.
Why would a member have a GMP ?
Because they chose not to pay into the state pension top up
Can members choose where the money is invested ?
No, the pooled fund is controlled by the employer
What type of member can make AVCs ?
Active members
What two ways can a memebr leave the pension scheme ?
1. By opting out ( the process will be in the scheme rules)
2. By leaving the employer, this triggers an automatic opt out.
What are the two types of DB pensions that could be offered by the company ?
1. Final salary
2. CARE - career average revalued earnings
When did GMP stop being accrued by memebrs ?
6th April 1997
Who bears the risk and cost of a DB pension ?
The employer , they need to ensure there is enough in the pooled fund to pay all of the memebrs
Where are AVCs usually held ?
With an external provider
How long does the leavers process take ?
up to 2 months
A Member automatically receives an annual statement showing what their annual pension is currently and what it could be at their normal retirement date (True or false)
True
What is the formal process a member has gone through to have GMP attached to their policy ?
Contracting out
Can we provide the members with the amount that is in the pooled fund ?
No, there are legal restrictions preventing the disclosure of the exact value of the pooled fund. This is to protect the scheme's financial stability and prevent any potential misuse of this information.
What two ways can an AVC be made ?
1. One off lump sum
2. Regular contribution coming off of their salary
(Check scheme rules)
Does a member get an annual statement ?
No - a member will not get an annual statement as the formula used to calculate their annual pension will not change. they can request a revalued statement at any time.
What is the formula used to calculate the DB pension ?
Salary X Length of service X Accrual rate
How could GMP impact DB members ?
They may not be able to take early retirement
What would you do if a member requested a fund value ?
Advise that DB members do not have individual funds as all of their contibutions go into a pooled fund with their colleagues and employers.
Ask what they need the information for and offer and annyual statement if active and a revlaued statement if deffered.
Check this is good enough or if they are needing a quote for a specific reason (transfer/retirement)
What two ways can AVCs be used ?
1. To purchase additional years of service, which makes the formula produce a higher pension amount.
2. As part of their Tax free cash , which results in a higher reduced pension.
What options will be included in the DB members leavers statement ?
1. Under 3 months service - member will get a refund of their contributions.
2. over 3 months service but under 2 years - members will need to transfer their pension to another provider.
3. 2+ years service - Members will remain preserved/deferred in the shceme, they can transfer the pension if they wish. If the member is over 55 they have the option to request early retirement.