Unit 4 - Pensions Regulation

Question 1

What are the main objectives of The Pensions Regulator (TPR)?

Answer 1

to oversee work based pensions schemes and to support employers with auto-enrolment duties

Question 2

What are the main responsibilities of The Pensions Regulator (TPR)?

Answer 2

a) ensuring employers are autoenrolling staff
b) improve way occupational schemes are run
c) protect pensions savings in workplace pensions

Question 3

What are TPR’s 3 main powers?

Answer 3

1) Gathering information – to identify and monitor risks, get infor from thematic reviews, whistleblowing reports & notifiable events
2) Regulation & enforcement – Can issue fines, issue improvement notices or prosecute individuals
3) Act against avoidance

Question 4

Name 2 notices the TPR can issue to act against avoidance

Answer 4

a. Contribution notice – Where there’s a deliberate attempt to avoid debt
b. Financial support direction – Requires money be put in to underfunded scheme
c. Clearance procedure – For employers who want to ensure a transaction won’t be subject to TPR’s anti avoidance powers

Question 5

As per Pensions Schemes Act 2017 what is TR’s responsibility regarding Matster Trusts?

Answer 5

Authorises & de-authorises them

Question 6

What types of pensions complaints would FOS deal with?

Answer 6

if someone was mis-advised re pension

Question 7

Who would deal with employer related pensions complaints?

Answer 7

pensions ombudsman

Question 8

According to FOS who are eligible complainants?

Answer 8

• Consumers
• Small charities
• Small businesses & more

Question 9

Name 3 tyes of awards the FOS can issue when they uphold a complaint

Answer 9

• Money award – different limits depending on when complaint refers & date occurring
• Distress/ inconvenience award – can be in addition to money awars
• Interest aware - Can either be as part of money award, on top of it or after the award has been calculated
• Costs award – FOS tells firm to reimburse customers costs
• Discretions – putting things right which don’t involve a financial award

Question 10

Which types of complaints will the Pensions ombudsman look in to?

Answer 10

deals with complaints about how a pension scheme is run including
- Making the wrong decisions
- Giving incorrect info
- Failing to do something it should have

Question 11

What is the Money and Advice Pensions Service (MAPS)?

Answer 11

Funded by levies on finance industry, it is a free service to provide people with guidance/ advice re their pensions

Question 12

What is the Pension Protection Fund?

Answer 12

Insurance scheme to protect DB and hybrid schemes

Question 13

How is the PPF funded?

Answer 13

By levies on pension providers - admin, fraud compensation and pension protection levies

Question 14

Name 2 occasions where the PPF would pay compensation

Answer 14

where a UK based DB scheme has become insolvent and scheme is underfunded or funds have been misappropriated through fraud

Question 15

Name 2 situations where the PPF would step in to take responsibility for a pension scheme

Answer 15

• An ‘insolvency event’ has occurred e.g employer gone into administration
• No chance the scheme can be rescued
• Assets remaining in the scheme wouldn’t provide adequate compensation

Question 16

What is the Financial Assistance Scheme and how much of an existing pension could it pay out?

Answer 16

Financial Assistance Scheme, helps those who lost pensions benefits through insolvencies but not covered by PPF - would pay out 90% of pension accrued and will pay £45k a year

Question 17

Which act stipulates that employers need to autoenrol eligible jobholders?

Answer 17

Pensions Act 2008

Question 18

What are the 3 categories of employees for autoenrolment purposes and what are employers’ obligations for them re autoenrolement?

Answer 18

1) eligible jobholders (have to be auto enrolled) 2) Non-eligible jobholders (have right to opt in, info on how to join has to be provided) 3) Entitled worker (have right to ask to join the scheme, info on how to join has to be provided)

Question 19

What are the two minimum levels of contributions employers can choose to pay their employees?

Answer 19

1) Base contributions on qualifying earnings (between £6k-£50k, min employer contribution is 3% and 8% total)
2) Use an alternative definition and pay contributions from ‘pound zero’
o 3 sets of min contributions:
 Set 1 – 9% min contribution, 4% from employer
 Set 2 – 8% min contribution, 3% from employer
 Set 3 – 7% min contribution, 3% from employer

Question 20

What are the opt in and opt out rights of eligible jobholders?

Answer 20

Eligible jobholder – Can opt back in if have previously opted out

Question 21

What are the opt in and opt out rights of entitled workers?

Answer 21

Has right to opt in but not opt out if they asked to join, employer doesn’t have to contribute

Question 22

How long is the opt out notice period if someone wants to opt out of a scheme?

Answer 22

1 month

Question 23

What are the two main master trusts usd by smaller employers?

Answer 23

NEST
The People’s Pension

Question 24

What is the people’s pension and when can it turn down business?

Answer 24

Non-profit organisation used for construction industry – Can turn down business it feels won’t be profitable

Question 25

For the people's pension what is the standard AMC and how much can be rebated?

Answer 25

0.5% AMC (Members can be rebated between 0.1% - 0.3% depending on size of pot)

Question 26

What are the 3 ways of dividing a couple's pension after divorce?

Answer 26

Offsetting Earmarking Pension Sharing

Question 27

What is offsetting for pensions when a couple divorces?

Answer 27

offsets value of pension against other assets, ex receives larger share of assets for loss of the share of the member’s pension

Question 28

For DB schemes, how is the pension amount measured when using offsetting?

Answer 28

Use the Cash equivalent transfer value (CETV) to establish gross value of the pension – then take in to account things like loss of future benefits, loss of death in service benefits to work out offset amount

Question 29

For DC schemes, how is the pension amount measured when using offsetting?

Answer 29

Calculate a % or proportionate value of the fund value – taking in to account loss of pensions benefits, loss of spouse’s pension and loss of death in service

Question 30

What is offsetting for pensions when a couple divorces?

Answer 30

earmarking future income/ lump sums from that pension

Question 31

What are the 2 different types of court order used for earmarking future pension benefits?

Answer 31

Earmarked periodic payment orders – to pay part of overall pension, or earmarked lump sum orders – to pay part of tax free cash

Question 32

Name a disadvatage and an advantage of using the earmarking method

Answer 32

- Disadvantages include: Benefits won’t be paid until member secures them (waiting a long time), long waiting time can mean that earmarking value can get larger or smaller over time - Advantages – Member retains control over investment decisions, no money changes hands at divorce stage

Question 33

What is the pensions sharing method when a couple divorces?

Answer 33

Shares pension rights at time of divorce

Question 34

What are 2 advantages of pension sharing on divorce?

Answer 34

Advantages to pension sharing for member are that they could lose less than if the other orders had been issued & provides a clean break – for ex-spouse it means no risk on re-marriage