Outline the conditions that must be met in order for a member of a defined benefit scheme
to have a statutory right to transfer their safeguarded benefits.
- Must not have made a request in last 12 months
- Must have ceased accrual/be a deferred member
- Make a formal application for transfer after receiving their statement of entitlement
- Request must be made at least 1 year before scheme’s normal pension age
- Must transfer all benefits (except GMP)
George has accepted a cash equivalent transfer of £495,000 from his former employer’s defined
benefit scheme. Explain what evidence he must provide to the scheme trustees to prove he has
received appropriate independent advice.
- Written confirmation from adviser to George
- Confirm advice provided was specific to the transaction and that the adviser had appropriate permissions to advise on transfer of safeguarded benefits
- FCA number and George’s name
- Confirm name of ceding scheme
What are GMPs?
- GMP for contracted out benefits accrued before April 1997.
- Members who were contracted out between April 1978 and April 1997 build up an entitlement
- In return for reduced employer and employee NICs, the trustees had to provide a minimum level of pension at least equivalent to the additional state pension that was given up.
- Value confirmed at date of leaving the scheme and revalued between date of leaving scheme and retirement
- Contracting out was abolished in April 2016
What are the statutory increases to pensions in payment for those reaching SPA before April 2016?
(Learn the table)
- Pre-1988 GMP: state is responsible for paying the increases to the GMP in payment
- GMP between 1988-1997: CPI max 3% (excess is paid for by state)
- Non GMP before 1997: no requirement
- 1997-2005: CPI max 5%
- Post 2005: CPI max 2.5%
What are the statutory increases to pensions in payment for those reaching SPA after April 2016?
(Learn the table)
- Pre-1988 GMP: scheme doesn’t have to provide escalation
- GMP between 1988-1997: CPI max 3%
- Non GMP before 1997: no requirement
- 1997-2005: CPI max 5%
- Post 2005: CPI max 2.5%
What are the statutory rate of revaluation?
- Pre-1997 GMP: valued at date of leaving service
- Pre-1997 excess: CPI capped at 5%
- Pre-2009: CPI capped at 5%
- Post 2009: CPI capped at 2.5%
What are the compensation levels for the PPF?
- Members who have reached NRA: 100%
- Members already in payment: 100%
- Members who have retired but yet to take benefits/or deferred: 90% subject to cap of £39,006.18 (so max £35,105.56 pa). Cap is reduce in line with members age if paid before 65
- Survivor: 50% member’s PPF entitlement
- One child: 25% member’s PPF entitlement, two children 50%
- Ill health members: up to 100% (case by case)
Rates of revaluation of deferred benefits within PPF
- Pre 2009: CPI capped at 5%
- Post 2009: CPI capped at 2.5%
Rates of escalation of benefits in payment from PPF
- Pre 1997: no increases
- Post 1997: CPI capped at 2.5%
