C7 - DB Design (Specifics)

Question 1

Sponsor may discriminate between individuals by:

Answer 1

• Level of benefits provided
• Form of benefits provided
• Providing/not providing benefits

Question 2

Factors sponsors use to discriminate between individuals (if allowed by law)

Answer 2

• Age
• Period of employment
• Type of work
• Hours worked
• Sex

Question 3

Factors that restrict sponsors discrimination options

Answer 3

• Law/scheme rules
• Business ethics
• Industrial relations (including competition)

Question 4

Advantages and disadvantages of minimum period of employment prior to entry

Answer 4

+ Reduces admin costs in connection with early leavers
+ Sponsor can target resources more efficiently
+ Rewards loyalty
+ Lower costs where service related benefits are based on DJS and not date joined company
- Less attractive to current and potential employees
- Ineligible employees may make alternative provisions
- Those in greatest need may have no protection

Question 5

Factors the State considers when setting SPA

Answer 5

• Costs involved
• Ages at which individuals commonly stop work
• Desire to create employment opportunities for the young
• Changing needs of individuals eg whether to use a flexible band of retirement ages
• Significant changes in life expectancy

Question 6

Common forms of retirement benefit

Answer 6

• Lump sum to meet immediate financial needs
• Pension to meet ongoing financial needs
• Indemnification against or subsidy of care costs

Question 7

Death in service benefits may be related to:

Answer 7

• Benefits that would have been received by the member remained in service until NRA
• Salary before death
• Service before death
• Potential service to NRA
• Availability/restrictions on insurance

Question 8

Vesting period

Answer 8

Minimum period of service with an employer after which an employer must provide benefits of some form if the employee leaves the scheme

Question 9

Benefit increases may be awarded:

Answer 9

• At a fixed rate
• Inline with an inflation index
• On a discretionary basis
• Combination of the above

Question 10

Ways occupational schemes can allow for integration with State benefits

Answer 10

• Reduction in accrual rate
• Reduction to accursed pension of an amount based in the State pension
• Defining pensionable pay as pay less an offset based on the State pension

Question 11

Potential legislative restrictions on schemes

Answer 11

• Limits on contribution amounts
• Restrictions on investment types
• Limits on benefits amount on form eg requirement for particular pension increases, min/max retirement ages