Part 3 - Benefits and Communications

Question 1

What must an employer do when a member leaves pensionable service

Answer 1

🤍 Notify the trustee

🤍 Provide the information needed to calculate the members benefit entitlement (eg final earnings)

Question 2

What factors determine what benefits become payable?

Answer 2

🤍 DB/DC
🩶 If opted out
🤍 Qualifying service
🩶 Contributory/ Non contributory
🤍 If contracted out
🩶 Rules of the Scheme

Question 4

What options does a member with <1 month service have?

Answer 4

🤍 Have the right to opt out and be treated like they never have been a member

🩶 Employer must generally refund within 1 month

🤍 if any contributions have been passed across to the pension scheme these must be refunded

🩶 Along with any employer contributions

Question 6

What is qualifying service?

Answer 6

🤍 Period of service that is taken into account to calculate the benefits a member is entitled to when they leave the scheme

Question 7

What is included in pensionable service?

Answer 7

🤍 Includes any period of service before entering the scheme which is pensionable

🩶 Any service in respect of a transfer value brought in from another arrangement

Question 9

What conditions must a member meet to get a Short Service Refund Lump Sum

Answer 9

🤍 less than 3mnths qualifying service in a DB scheme (and not opting out within the one month)

🩶 less than one month service in a DC scheme

Question 10

What is a member usually entitled to for a Short Service Refund Lump Sum

Answer 10

🤍 Refund of their own contributions (incl any AVCs) paid

Question 11

How is tax applied to Short Service Refund Lump Sums

Answer 11

🤍 20% for first £20,000
🩶 50% on anything over

Question 12

What must any investment return on refunded AVCs be paid as

Answer 12

Gross

But must be declared as individual tax (Scheme Administrations Member Payment)

Question 13

What happens to refund where the member was a member of an opted out pension scheme

Answer 13

🤍 Member shares the cost of reinstating them in the State Second Pension scheme

Question 15

Where is A CEP payable?

Answer 15

🤍 An employee left pensionable service which was contracted out and took a refund; and

🩶 the leaving date is before the tax year in which they reach State Pension Age

Question 16

What does a CEP payment do?

Answer 16

🤍 Restores the employees right in the State pension

🩶 Extinguished their right to any contracted out benefits in the scheme

Question 17

What does CEP stand for?

Answer 17

Contributions Equivalent Premium

Question 18

What does the CEP represent?

Answer 18

The employers and employees additional National Insurance contributions which would have been paid if the member had not been contracted out

Question 19

What is the employees share of the CEP called?

Answer 19

Certified amount

Question 21

If member has between 3mnths and 2 years in a DB Scheme

Answer 21

a choice between;

🤍 A refund of the members own contributions (inc any AVCs)

🩶 Transfer the value of their benefits, to another suitable arrangement

Question 22

How long do trustees usually have to notify leavers with 3m to 2y service of their options

Answer 22

3 months

(May leave this open indefinitely and if time period lapses refund of cont will be paid)

Question 23

What happens if a leaver with 3m to 2y service brought a transfer in?

Answer 23

🤍 A refund or cash transfer sum is not available

🩶 Also applied to members with DC benefits from 1 Oct 2015

Question 24

What are the options of member has at least two years qualifying service in a DB or one month in a DC

Answer 24

🤍 Under Pension Schemes Act 1993 members are entitled to preserved benefits in the scheme when they leave

Question 25

What does NIC&EO stand for

Answer 25

National Insurance Contributions and Employer Office

Question 26

What does CEP stand for

Answer 26

Contributions Equivalent Premium

Question 27

Where is a CEP payable?

Answer 27

🤍 an employee left pensionable service under a scheme which was contracted out and took a refund and 🩶 Their leaving date is before the tax year in which they reach state pension age

Question 28

What does a CEP payment do?

Answer 28

🤍 Restores the employees rights in the State pension scheme as if they had not been contracted out; and 🩶 Extinguished their right to any contracted out benefits in the scheme

Question 29

What does a CEP represent?

Answer 29

The employers and employees additional National Insurnace contributions which would have been paid should the employee not have been contracted out

Question 30

From when are CEPs not payable?

Answer 30

6 April 2018

Question 31

What choices does a member with between 3 months and 2 years service get

Answer 31

🤍 Refund of contributions 🩶 Transferring the value of their benefits (cash transfer sum)

Question 32

Is a Cash transfer sum available if a member had brought a transfer into the scheme from a personal pension or DC scheme from 1 October 2015?

Answer 32

No

Question 33

What do transfer in to DB schemes provide members with?

Answer 33

🤍 Fixed amount of pension 🩶 A period of additional service

Question 34

What do transfers in to DC schemes typically provide?

Answer 34

🤍 Increase in the members Fund value

Question 35

What will a receiving arrangement need to obtain to correspond directly with the previous arrangement

Answer 35

🤍 Explicit authority from the member

Question 36

What information is typically required from the transferring arrangement?

Answer 36

🤍 Members personal details 🩶 Name of the transferring scheme 🤍 Type of arrangement 🩶 If any contracted out benefits are included in the transfer value 🤍 Pensionable service details 🩶 Whether transfer contains a transfer in from a previous arrangement 🤍 Value of member benefits, conts and AVCs incl 🩶 Current transfer value and if any guarantee period applies 🤍 Statement of equalisation for service post 17 May 1990 (plus a statement to the extent which any GMP has been equalised 🩶 Confirmation of any court orders (Earmarking, pension sharing, maintenance, bankruptcy)