Section 1 (1-8)

Question 1

Pension transfer suitability requirements

Answer 1

1. Must be in writing
2. Must assess advantages and disadvantages of transferring
3. Must take into account other material information
4. Include analysis of financial implications

Question 2

Three steps for advising insistent clients

Answer 2

1. Follow normal advice process
2. If the client insists on acting against the advice of the adviser, reaffirm the implications of doing so
3. Include a clear statement that the client is acting against the advice of the firm

Question 3

How is the CETV calculated?

Answer 3

1. Pension at date of leaving (determined by accrual rate, salary and years of service). Revalued as per scheme rules (RPI/CPI/NAE)
2. Pension at date of NPA. Capitalised using annuity rate assumptions
3. Capitalised value of pension. Discounted at appropriate rate, given amount of time to NPA
4. ICE. Adjusted for underfunding/discretionary increases
5. CETV

Question 4

Differing assumptions for CETV and TVAS

Answer 4

CETV assumption are set by the scheme. TVAS assumptions are set by the FCA.

Assumptions: annuity rates, inflation and NAE

Question 5

What is an employer covenant? How could it lead to a reduced CETV?

Answer 5

Employer’s legal obligation and financial ability to support its scheme.

• reduce/eliminate risk
• maintain funding on a long term basis
• give trustees confidence in future funding
• no need to reduce CETV as remaining/existing members will not be disadvantaged

Question 6

Features of EPP

Answer 6

• might have protected tax free cash. Benefits can be lost unless part of block transfer
• some contracts include GAR
• typically set up for one person

Question 7

Steps a client must take if they want to access their benefits flexibly

Answer 7

It benefits are safeguarded and the transfer value is more than £30k, the member will have to provide evidence to the trustees that he has received independent advice from a firm that has appropriate regulatory permissions.

Question 8

Timeline for statutory transfers over £30k

Answer 8

Day 1: member requests statement of entitlement.
1 month: within 1 month the scheme must inform the member of the requirement to seek independent financial advice
3 months: guarantee date
3 months and 10 days: within 10 days of guarantee date the trustees must provide the statement of entitlement and inform member of deadline to provide evidence of advice
6 months: deadline to apply for transfer in writing
6 months and ten days: within 3 months and 10 days of guarantee date, deadline to provide evidence of advice.
9 months: within 6 months of guarantee date, and with evidence of advice, trustees make transfer.