What does the 20% up to a certain amount and 50% thereafter apply to? Sorry for the crappy card just 5/5 if dont want to see again

If you leave your DB scheme within 2 years of service It's 20% to £20k and 50% thereafter

Brand set 3 Flashcards by James Wilkinson

What is the underpinned LTA?

£1.8m - the value of SLA before reductions

Specific to Primary protection

Once SLA surpasses £1.8m - use that figure in Primary Protection equations

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What is the primary protection equation?

(£x / £1.5m) * £1.8m

Other ways to think about the same equation:

(£x / £1.5m) * [underpinned LTA]

PPF * [underpinned LTA]

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What range of pension savings were required for Primary Protection?

£1.5m - £1.8m

Think about the equation - it wouldn’t make sense if £x was less than £1.5m

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Can Primary Protection holders make contributions?

Yes

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What is the min value for Primary Protection to apply?

£1.5m

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How can Primary Protection be lost?

If divorce reduces value to less than £1.5m

Market performance is irrelevant

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Market performance drops pension value to £1.35m. I have Primary protection. What are the consequences?

Primary Protection is not lost if investment performance is the reason for the drop below £1.5m

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How often must my company re-enrol eligible jobholders (who previously opted out) into the pension scheme?

Every 3 years

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The company I own has insufficient resources to run it’s DB scheme anymore
- who is the body concerned?
- what is the name of the thing that can be issued against me?

Sorry for the shit question

The Pensions Regulator

Can issue a financial support direction

But not fines and restoration orders for this reason alone

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What kind of arrangement is an offset order?

A clean break arrangement

You don’t get any of my shit and I don’t get any of yours

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I have a DB pension.
I have just been divorced.
We are applying an offset order.
How is the amount to be offset calculated?

Using a CETV

and taking into account income tax payable on any pension

Re-marriage would not impact this order

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My ex is remarrying. How does this impact our offset order?

What is an offset order?

It does not impact it

As it was taken out at divorce

A clean break arrangement where you dont get each others pensions on divorce

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On divorce, can my S2P entitlement be shared?

Yes

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On divorce, can my public sector scheme pension be shared?

Yes

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On divorce, can my AVCs be shared?

Yes

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On divorce, can my new full new state pension entitlement be shared?

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I have a pension sharing order with my ex. Is the taking of benefits inter-dependent?

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I have an earmarking order with my ex. Is the taking of benefits inter-dependent?

Yes

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Why is the employer’s definition of pensionable remuneration important to DB members?

Because the pay is usually a factor of the final salary, or final “pensionable remuneration”

(e.g. bonuses/overtime/commission/BIKs..)

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What name is given to the type of liability that a DB pension is?

Open ended

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What contributes to the potential liability of running a DB scheme?

(3) - what could make running your DB scheme more difficult?

Age & marital status
Number of deaths (pre retirement)
Returns of underlying investments

Company profits would not contribute to this issue

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What is the legal minimum escalation for DB schemes in payment between 1997 and 2005?

5% to a max of CPI

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What is the legal minimum escalation for DB schemes in payment now?

Since when has this minimum been in place?

2.5% to a maximum of CPI

Since 2005

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If the trustees of a DB scheme have developed a recovery plan, this means that…

The scheme is in deficit

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If my DB pension scheme which I'm a trustee for is in a deficit, what must I do?

Develop a recovery plan

If I leave my company's DB scheme within 2 years and they allow a refund of my contributions, what is the tax position?

First £20k is 20% Everything after is 50%

What does the 20% up to a certain amount and 50% thereafter apply to? ## Footnote Sorry for the crappy card just 5/5 if dont want to see again

If you leave your DB scheme within 2 years of service ## Footnote It's 20% to £20k and 50% thereafter

PCI Pension contributions are tax free. True/False?

False

How does Pension Contribution Insurance work? ## Footnote (3)

Covers pension contributions in event of incapacity to work Both member and employer contributions are covered Payments begin after a deferred period ## Footnote Not tax free payment BS3 Q.40

How long is the commutation period?

12-months ## Footnote The amount of time in which the payment must be made BS3. Q41

What is the total limit for Trivial Commutations?

£30,000 across all schemes ## Footnote BS3. Q41

What age can Trivial Commutation apply?

From 55 ## Footnote BS3 Q.41

How is the trivial commutation payment taxed?

25% tax free 75% marginal rate ## Footnote BS3 Q.41

What are two options for taking income from FAD?

Regular withdrawals Short term annuities ## Footnote Unclear if this is exhaustive BS3 Q.43

What is the "critical yield"? ## Footnote (Definition)

"the investment growth rate required in income drawdown to provide and maintain an income equal to that available under an annuity" ## Footnote BS3 Q.44

What is type A critical yield?

The growth rate needed to provide an income equal to that under an equivalent immediate annuity ## Footnote BS3 Q.44

How do you calculate a person's individual GAD rate?

[(Generic GAD rate) * fund value less PCLS] ## Footnote Generic GAD rate often given as £x per £1,000 BS3. Q.45

How do you calculate an individual's maximum income from capped DD?

[(Generic GAD rate) x (fund value - PCLS)] x 1.5 ## Footnote BS3 Q.45

What is the minimum income I can take from my Capped DD if I'm 76?

£0 ## Footnote 76 is a red herring (I think) BS3 Q.45

Employers must automatically enrol all workers … ## Footnote (2)

Aged between 22 and SPA Earning above £10,000 ## Footnote BS3 Q.1

Who does the Pension Protection Fund protect?

Only Members of DB pensions Where the employer has become insolvent ## Footnote BS3 Q.2

How are State Pensions funded?

By current NICs ## Footnote BS3 Q.3

Order and date the following: S2P, SERPS, SGP, State Basic Pension, Full New State Pension (FNSP)

SGP [‘61-‘78] SERPS [‘78-‘02] S2P [‘02-‘16] FBSP [‘16-today] State Basic Pension applied in conjunction with SERPS and S2P

Relevant UK Earnings Calculation: Is earned income included?

Yes

Relevant UK Earnings Calculation: Is rental income included?

Relevant UK Earnings Calculation: Are charitable donations included?

Relevant UK Earnings Calculation: Are pension contributions included?

My circumstances: I earn a salary I receive rental income I make pension contributions I make charitable donations Which elements are used to calculate my relevant UK earnings?

Only salary ## Footnote Pension contributions and donations are not earnings. Rental must not be relevant.

In 2021/22 I contributed to my pension and so did my employer. When calculating how much AA I have used, which of the two are included?

Both ## Footnote BS3 Q.7

I earn nothing this tax year. I take an UFPLS withdrawal. Does the PCLS element take up any of my PA? If so, how much?

It does not ## Footnote BS3 Q.8

In 2006 I crystallise a pension worth £750k when the LTA was set at £1.5m. How much LTA do I have remaining in 2022/23?

£536,550 ## Footnote If you used up some of your LTA back in the day, it is calculated as a percentage used. That is, 50% used, so 0.5 x £1,073,100 BS3 Q.9

I have protected PCLS over £25k from an Executive Pension Plan (EPP). If I take my PCLS and leave the remaining funds uncrystallised, do I lose my scheme specific PCLS protection?

Yes ## Footnote BS3 Q.10

I have protected PCLS over £25k from an Executive Pension Plan (EPP). If I take my PCLS, but also withdraw the full remaining plan, do I lose my scheme specific PCLS protection?

No ## Footnote BS3 Q.10

I have protected PCLS over £25k from an Executive Pension Plan (EPP). If I transfer to a deferred annuity due to scheme wind up, do I lose my scheme specific PCLS protection?

No ## Footnote BS3 Q.10

I have protected PCLS over £25k from an Executive Pension Plan (EPP). If I transfer my benefits as part of a bulk transfer, do I lose my scheme specific PCLS protection?

No ## Footnote BS3 Q.10

If I am nominated as the beneficiary of my uncle's DC plan, which of the following benefits are available to me? - Lifetime annuity - Scheme pension - FAD - Lump sum

- Lifetime annuity - FAD - Lump sum | Scheme pension is only available to dependants ## Footnote BS3 Q.11

Why might an employee view trust based pension schemes as more valuable than contract based schemes? ## Footnote Question under review

Because the scheme provides the protection of trustees, unlike contract based which is outsourced to a third party ## Footnote BS3 Q. 27

Who do "trigger events" get reported to?

The Pensions Regulator ## Footnote BS3 Q.29

What was put in place that meant that trustees for authorised pensions must be 'fit and proper'

The Pension Schemes Act 2017 ## Footnote BS3 Q.29

I want to set up a pension to invest directly in the stock market. Which would you recommend and why?

A SIPP Although SSAS would also offer this opportunity, I cannot set one up - it must be set up by a company ## Footnote BS3 Q.30

What are the minimum standards required of stakeholder pensions? ## Footnote (4)

- Accept **transfer** payments from other pensions - No **transfer** charges - Accept **minimum** contributions of £20 per month - **Maximum** annual fund charge of 1.5%, reducing to 1.0% after 10 years ## Footnote Transfer Transfer Minimum Maximum BS3 Q.31

What is the difference between a "defined benefits lump-sum death benefit" and a "pension protection lump-sum death benefit"?

Pension protection lump sum is paid from a DB scheme in payment DB lump sum death benefit is paid before any benefits are crystallised ## Footnote BS3 Q.32

Define mortality gain

Annuity rates are set assuming that some of the members will die early. The money saved from the early deaths is mortality gain. ## Footnote BS3 Q.34

Define mortality cross subsidy

When the money saved from early deaths of some annuitants is used to pay for the late deaths of others ## Footnote BS3 Q.34

Define mortality drag

The extra return required from drawdown investments to offset the loss of the cross subsidy that exists within an annuity ## Footnote BS3 Q.34 [8/44]

What is the name of the risk associated with choosing drawdown over annuities?

Mortality drag ## Footnote BS3 Q.34

What is the key relationship between the MPAA and capped drawdown?

As long as the income stays within the capped amount, the MPAA is not triggered ## Footnote BS3 Q.35

A State Pension benefit statement provides you with...

an estimation of your State Pension based on your NICs record ## Footnote BS3 Q.36

How are savings considered when assessing eligibility for State Pension Credit?

"Any savings are deemed to provide an income of £1 for each £500 of savings over £10,000" ## Footnote BS3 Q.38 good example

Which class of NICs do **not** count towards your state pension entitlement?

Class 4 ## Footnote BS3 Q.39

What are the main risks an adviser should make a client aware of when they are thinking of designating funds into FAD? ## Footnote (3)

1. Potentially **high charges** for admin and reviews 2. The **investment performance** can cause your fund to go up or down 3. The potential of **fund depletion** ## Footnote BS3 Q.46

With regards to expenditure, what should I be aware of for when I retire? ## Footnote (4)

1. NICs likely cease 2. Pension contributions likely cease 3. Likely no longer need income protection 4. Likely no longer need to accumulate savings ## Footnote BS3 Q.47

Do all fixed interest securities have a fixed redemption date?

No ## Footnote BS3 Q.48

What occurs at the fixed redemption date of a Fixed Interest security?

It is redeemed at the nominal value ## Footnote BS3 Q.48

All fixed interest securities provide a guarantee of capital at maturity and during their term. True or false?

False ## Footnote BS3 Q.48

Brand set 3 Flashcards

(75 cards)