What is crystallisation?
The taking of an income or the provision of a lump-sum payment (in the form of a PCLS, an UFPLS or as a lump-sum death benefit).
DC schemes don’t have to offer any flexible access options. Members would need to ___.
transfer their benefits to a scheme that does.
PCLS: In most cases ~ of the fund is paid tax free, with the balance taxable as pension income via PAYE assuming member has sufficient ~~.
- 25%
- LSA available.
Small pots payments relate to ~ schemes.
DC
The limit for small pots payments is:
3 small pots from non-occupational schemes at £10k each
(or unlimited number from unconnected occupational pension schemes)
Are small pots payments from uncrystallised funds tested against the member’s LSA or LSDBA?
No.
Trivial pots payments relate to ~ schemes.
DB
The commutation limit for trivial pts payments is £~?
£30k.
For trivial pots payments, what is the nominated date?
The date, chosen by the member, on which all their pension benefits are valued.
How long does the member have to start commuting their trivial benefits from their nominated date before they’d have to choose another nominated date & start again?
3 months.
Any small pots payments made before the nominated date are ___ when calculating the total for trivial pots benefits.
not included
Any trivial pots payment must be made within how long from the *commutation period**? i.e. the start of when the 1st commutation payment was made.
12 months.
How many commutation periods can an individual have in their lifetime?
Just 1.
Name 2 occasions when a trivial commutation lump-sum death benefit can be paid.
- a survivor commutes a survivor’s pension; or
- a member dies within the guarantee period of a pension they are receiving and the recipient of the guarantee wishes to commute the remaining payments.
The maximum trivial commutation lump-sum death benefit is £30,000 ___, not ___.
- per scheme
- across all schemes.
Name 2 conditions in order to be able to commute a survivor’s pension for trivial commutation lump-sum death benefit.
- must be paid to a dependant or nominee of the member
- payment must extinguish the survivor’s entitlement to pension & lump-sum death benefits under the scheme.
How do you value annuity income / income drawdown in payment before 6 Apr 2006?
Annual income being received / Max GAD withdrawal at 5 Apr 2006 x 25.
How do you value annuity income / uncrystallised DB scheme in payment after 5 Apr 2006?
Income at commencement x 20 + any PCLS taken.
Name 2 ways a scheme pension can be paid.
- directly from the scheme’s assets; or
- by an insurance company selected by the scheme administrator
Name 4 benefits of paying a scheme pension directly from the scheme assets.
- capital
- funds
- rates/health
- health
- no immediate outflow of capital
- funds remain invested
- may benefit from an increase in annuity rates or worsening of member’s health
- benefits from ‘mortality gain’
Name 4 drawbacks of paying a scheme pension directly from the scheme assets.
- £
- health
- risk
- ease
- payments must be made no matter what
- members/their dependants may live longer
- scheme retains longevity & investment risk
- more admin for scheme
What is the only way a DB pension can pay benefits in retirement?
A scheme pension.
Before a DC pension can offer a scheme pension, what must it offer?
A lifetime annuity.
Name 3 ways a scheme pension can provide a benefit following the death of a member.
- a dependant’s scheme pension;
- a guarantee period; and
- a lump-sum death benefit.
