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Pensions Overview Flashcards

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1
Q

What do scheme rules and legislations set out

A

Benefits to be paid
When these are due
Accrued benefits
Increases

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2
Q

What is more popular defined scheme

A

Dc because Db is more expensive and puts risks on employers
Investment risk

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3
Q

What do the scheme rules do

A

Set out benefit structure
Shows all scenarios on how schemes should be administered
Complex so should be fully understood

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4
Q

What are tranches

A

When scheme evolves over time and attracts certain benefits

Different rules for different years of pensionable service

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5
Q

Why must a members data be accurate

A

Changes can occur (spouse at time of death)
Accurate payments
Incorrect benefits type and amount
Benefits not paid to correct person, at all or at the time

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6
Q

What must payroll schemes reflect

A

Scheme rules

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7
Q

What is used for pension after and regulations

A

Safeguarding (maxwell)
Court cases (barber)
Improve pension industry

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8
Q

Why are legislation changes complex

A

Most can only be applied to future
Do not change benefits already accrued

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9
Q

Why must legal advice be obtained during changing scheme rules

A

Some are overriding
Rules can be amended before changes are introduced

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10
Q

What is a consequence of mistakes being made

A

Expensive to correct

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11
Q

What is a deed of amendment

A

When schemes don’t update scheme rules as they are expensive
For not that many changes
For necessary changes

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12
Q

What should you be aware of when processing

A

Many deed of amendments
Overriding legislation

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13
Q

What requirements affect scheme rules

A

HMRC
preservation
Disclosure
Equal treatment
Data protection
Contracting out

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14
Q

Why is registering with HMRC important

A

Maintains registration status
Tax advantages

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15
Q

What are preservation requirements

A

Deferred members
Dictate how benefits revalued
Members do not lose value between date left pensionable service to date they take benefit

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16
Q

What are disclosure requirements

A

Set information provided to members

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17
Q

What was the difference in equal treatments

A

60 for women
65 for men

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18
Q

When did men and women equalise

A

17/05/1990

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19
Q

What is the barber ruling

A

Court case for equalisation of ages
Only affects db schemes
Resulted in men having 3 different retirement ages
Some schemes may not update this

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20
Q

When did this window close

A

Pension act closed it in 2020 to 01/01/1996

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21
Q

What are the 3 retirement ages

A

Up until 19/05/1990 me. Could have 65
During window men could have 60
After EQUALISATION men could have 66

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22
Q

What is contracting out cors

A

Members could leave state pension scheme
EER and EEE NI went to members main scheme as a result of members paying less

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23
Q

What are redirected NI called

A

GMP 1978-1997 DB
protected rights DC

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24
Q

What is GMP

A

Replaced with reference scheme test from 1997
Equalised in May 1990
2018 ruled can backdate payments
Provide at least SERPS

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25
What is SERPS
State earnings related pension scheme
26
What is protected rights
Redirected NI pension Abolished in 2012 If scheme states protected rights, it will still remain
27
When was protected rights abolished
Dc- April 2012 Db-April 2016
28
What member data will not change
NI number DOB Date of joining
29
What data will change member
Pensionable salary Updated payments due to increase Marital status Gender Membership category
30
How is accurate data maintained
Peer review Follow procedures Monitored for data changes
31
Consequences of errors
Scheme efficiency or customer service Reputation Stress to member Cost of fixing error or compensation Lack of confidence
32
How do you ensure data is correct Why
Complex of tranches Procedures to check Peer review
33
Options provided to members and documentation
Marriage certificate Bank details Payment commencement lump sum Setting up pension payments Birth cert
34
Who can use open market option
Dc schemes
35
What is open market option
Choose annuity from different insurance provider Documentation to transfer fund 14 day guarantee
36
How much did fraud increase 2009-2019
55% 190 billion
37
Examples of fraud
Contributions not being passed over to scheme Company using funds ease cash flow Ghost false memebers created False schemes Memebers faking death receiving payments Not knowingly reporting deaths Inaccurate reporting Diverting money by administrators
38
What we can do to prevent fraud
Separation of duties Auditing External audits
39
Who is external auditor appointed by
Trustees of scheme
40
When is audit produced
Annually Report 7 months within end of scheme year
41
Payroll software must
Apply tax code Handle db or dc schemes Accurate records
42
Must comply with system
HMRC Gdpr Scheme rules Trust deeds
43
What do pension scheme rules specify?
They define the benefits a member is entitled to, when they are paid, how they increase, and how they accrue.
44
Why must pension administration software align with scheme rules and legislation?
To ensure correct calculations, secure data storage, and accurate benefits processing.
45
Why has the market for pension admin software shrunk?
Due to the decline in the number of defined benefit (DB) pension schemes.
46
What are 'tranches' in pensionable service?
Different parts of pensionable service subject to different rules or increase rates.
47
Why is it important to understand scheme rules?
So the payroll system can accommodate all benefit structures and ensure the correct data is captured.
48
What happens if there is a conflict between scheme rules and other scheme documents?
Scheme rules override all other documents such as member booklets.
49
What are overriding regulations?
Legal requirements that apply regardless of whether scheme rules have been updated.
50
What is a Deed of Amendment?
A document used to update scheme rules without replacing the full rule set.
51
What is the importance of Deeds of Amendment in pensions?
They reflect rule changes and must be accounted for in payroll to ensure accurate payments.
52
What are HMRC requirements for pension schemes?
To maintain tax-advantaged status, schemes must follow.
53
What are HMRC requirements for pension schemes?
To maintain tax-advantaged status, schemes must follow contribution and benefit limits set by HMRC.
54
What are preservation requirements?
Rules to ensure deferred members' benefits maintain their value from leaving service to retirement.
55
What are disclosure requirements in pensions?
Legal duties to provide members with scheme and member-specific information.
56
What is the Barber window?
A period from 17 May 1990 to 1 Jan 1996 when men and women had to be treated equally for pension age.
57
What is the significance of GMP equalisation post-1990?
Schemes must ensure GMPs are equalised for transfers made since 1990, though this can be complex and costly.
58
What does GDPR require in pensions?
Strict protection of sensitive member data in line with the Data Protection Act 2018.
59
What were Protected Rights?
Pension benefits in DC schemes built from National Insurance rebates under contracting out.
60
What is the Reference Scheme Test (RST)?
A statutory test used to replace GMPs after 1997 for DB schemes to continue contracting out.
61
Why is accurate member data important?
Because it affects benefit calculations and ensures correct payment to members or beneficiaries.
62
Which data fields are fixed and unlikely to change?
Date of birth, NI number, and scheme join date.
63
Which data fields are variable and must be updated regularly?
Pensionable salary, pension increases, marital status, and membership category.
64
Why is it critical to ensure member data is accurate when setting up pension payments?
Inaccurate data can result in incorrect payments, delayed payments, or payments to the wrong person.
65
What are the potential consequences of pension payment errors?
Administrative costs, member stress, loss of trust, and compensation liabilities.
66
What does the checking process typically include before retirement?
Validating data, applying tranches correctly, peer reviews, and accuracy checks.
67
What documents are required from a member when setting up pension payments?
Retirement option forms, birth and marriage certificates, and bank or building society details.
68
What is the open market option in a DC scheme?
A member chooses to buy an annuity from a provider other than their pension provider.
69
What is a 14-day guarantee period in annuity purchase?
The time within which annuity rates and paperwork must be submitted to secure the quoted rate.
70
Define pension fraud
Deceit or manipulation for personal gain, including pension scams and unauthorised fund use.
71
Give examples of pension scheme fraud.
Ghost members, false salary data, fake deaths, benefit claims by non-members, or withholding contributions.
72
What is the purpose of duty separation in pensions administration?
To reduce the risk of fraud by ensuring multiple people are involved in each process step.
73
How does an audit trail help prevent fraud?
It records who did what and when, making it easier to identify suspicious activity.
74
Who appoints the scheme's external auditor?
The trustees of the pension scheme.
75
What is a 14-day guarantee period in annuity purchase?
The time within which annuity rates and paperwork must be submitted to secure the quoted rate.
76
Define pension fraud
Deceit or manipulation for personal gain, including pension scams and unauthorised fund use.
77
Give examples of pension scheme fraud.
Ghost members, false salary data, fake deaths, benefit claims by non-members, or withholding contributions.
78
What is the purpose of duty separation in pensions administration?
To reduce the risk of fraud by ensuring multiple people are involved in each process step.
79
How does an audit trail help prevent fraud?
It records who did what and when, making it easier to identify suspicious activity.
80
Who appoints the scheme's external auditor?
The trustees of the pension scheme.
81
What must the external auditor produce?
An annual audit report and accounts within seven months of the scheme year-end.
82
What are some common pension frauds involving members?
Fake death claims, forged ill-health claims, and encouraging transfers to unsuitable investments.
83
What was the reported loss to pension scams since 2017 (as of 2020)?
Over £30 million, according to the FCA and The Pensions Regulator.
84
Why is peer checking essential in pensions admin?
It ensures errors are caught early and reduces the risk of fraud.

Pensions (2 decks)

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