Knowledge Gaps - Retirement Options

Question 1

What is the most common way of providing a workplace pension for employers?

Answer 1

Through a master trust

Question 2

What is a benefit of using master trusts for employers?

Answer 2

Gives employers with protection/ governance at a lower cost than having its own scheme - also more control over contribution/ benefit levels for employees

Question 3

What is the National Employment Savings Trust (NEST)?

Answer 3

A master trust to support autoenrolment for employers no matter how small or large

Question 4

What are the main differences between eligible & non-eligible jobholders?

Answer 4

Eligible - 22+ automatically enrolled if earning £10k+
Non-eligible - Not autoenrolled and only provided with info if 16-21 and earning more than 10k+, or earning between £6k-£10k

Question 5

Do employers have to provide entitled workers with information on how to opt in to their pension scheme?

Answer 5

Yes

Question 6

How are eligible jobholders also classed as?

Answer 6

type 1 workers

Question 7

What is the staging date with regards to autoenrolled pensions?

Answer 7

The date when employers needed to implement changes required in the workplace pension reforms and be in a position to autoenrol empoyees

Question 8

What do employers have to provide to employees if they want to postpone the date they enrol an employee in to a pension?

Answer 8

Postponment notice

Question 9

When do employers not have to autoenrol eligible jobholders?

Answer 9

When the co only has one director

Question 10

What is the range of a members qualifying earnings for autoenrolment purposes which employers have to pay in to pension?

Answer 10

Between £6240 & £50,270

Question 11

In % terms how much must an employer pay in to a pension?

Answer 11

3%

Question 12

In % terms how much must an employee pay in to a pension?

Answer 12

5%

Question 13

Does a pension scheme member have to retire in order to be able to take their benefits?

Answer 13

No

Question 14

What is small pension pot commutation?

Answer 14

Allows people with less than £10k in pension schemes to take the benefit as a cash lump sum

Question 15

When can someone be eligible for small pension pot commutation?

Answer 15

Whhen the pot is less than £10k, when person is under 55 & in ill health

Question 16

What is trivial commutation and when can somone be eligible?

Answer 16

When someone wants to take pension benefits which are less than £30k for all schemes, need to be under 55

Question 17

What is the tax treatment of small pension pot & trivial commutation?

Answer 17

25% tax free and remainder subject to tax on member’s rate

Question 18

What is an uncrystallised fund pension lump sum (UFPLS) ?

Answer 18

A lump sum a member can take when over 55, can take 25% tax free cash - any more is subject to amrginal tax rate

Question 19

Which allowance does taking UFPLS trigger?

Answer 19

The Money Purchase Annual Allowance

Question 20

What is someone who takes out an annuity called?

Answer 20

The annuitant

Question 21

What is an annuity?

Answer 21

A oproduct bought from a pension provider which guarantees an income in retirement

Question 22

Is income from annuities taxable?

Answer 22

Yes

Question 23

What does the income from an annuity depend on?

Answer 23

• amount of pension pot
• annuity rate

Question 24

What determines annuity rates?

Answer 24

Gilt yields
life expectancy
Age
Health & lifestyle

Question 25

What is an impaired life annuity?

Answer 25

An annuity which offersd higher rates for those with specific medical conditions (because they'll have shorter lifespans)

Question 26

What is an enhanced rate annuity?

Answer 26

Offer higher rates to those with specific conditions/ lifestyles (e.g obese or smokers)

Question 27

What are the two types of drawdown options for pensions?

Answer 27

Capped drawdown Flexi-access drawdown

Question 28

What is capped drawdown and when did people stop being able to use it?

Answer 28

Taking benefits via drawdown whilst staying invested, stopped April 2015

Question 29

what is the maximum income level for capped drawdown?

Answer 29

150% of income

Question 30

Are capped drawdown pensions subject to MPAA?

Answer 30

No

Question 31

What is flexi-access drawdown?

Answer 31

When someone can drawdown any amount they like over any period they choose

Question 32

When is the MPAA triggered for flexi access drawdown arrangements?

Answer 32

When someone startes to take an income from pension

Question 33

How are both capped drawdown & flexi access drawdown subject to tax?

Answer 33

Subject to income tax

Question 34

Which pension income options are offered through a defined benefit scheme?

Answer 34

A member of a defined benefit scheme can take a lump sum as defined in the scheme rules plus a pension. This will depend on their final salary (or career average salary), their length of service and the scheme’s accrual rate as well as an income

Question 35

What is phased retirement?

Answer 35

When someone starts taking pension benefits whilst working, portion of the pension is crystalised to provide an income

Question 36

What are 2 benefits of phased retirement?

Answer 36

Funds which aren;t crystalised can remain invested Allows potential for better annuity rates when someone is older

Question 37

What is a risk of phased retirement?

Answer 37

Pot stays invested so could reduce

Question 38

What is delayed retirement?

Answer 38

Leaving pension benefits uncrystalised and taking retirement income from other sources (ISAs etc)

Question 39

If a DC member dies after receiving their beenfits, what are the 4 categories of recipients

Answer 39

Nominees Survivors Successors Dependents

Question 40

Who is classed as a nominee for recipients of pension death benefits on another's death?

Answer 40

Someone the pension member has requested receives benefits on their death

Question 41

Who is classed as a survivor for recipients of pension death benefits on another's death?

Answer 41

Specifically for annuities, those who will receive the annuity income

Question 42

Who is classed as a successor for recipients of pension death benefits on another's death?

Answer 42

People who have been nominated by the nominee to receive benefits when the nominee dies

Question 43

Who is classed as a dependant for recipients of pension death benefits on another's death

Answer 43

Only for scheme pensions, usualy kids/ spose who receive benefits from death in service scheme pensions

Question 44

What are the benefits for receiving a lifetime annuity on death?

Answer 44

Remaining guarantee period paid to nominee Receive the survivor's annuity

Question 45

What are the benefits for receiving a lifetime annuity on death?

Answer 45

Successor/ nominee can take entire pension as a lump sum & purchase an annuity with the pension fund

Question 46

What is the difference for tax treatment when death benefits are paid under 75 compared to over 75?

Answer 46

Under 75 - benefits paid tax free to nominee/ survivor/ successor Over 75 - subject to income tax at marginal rate