vq examiners’ report march 2017...vq examiners’ report march 2017 the total number of entries...

VQ EXAMINERS’ REPORT MARCH 2017

The total number of entries for this round of examinations was the highest for a number of years at 625, with 577 scripts actually being received. It was noticeable that the number of entries for both of the Leavers papers was significantly higher than the other papers. Since these are generally the first units to be entered by candidates, it indicates that there were many candidates who were taking these examinations for the first time. Although the number of candidates submitting scripts was high, the average pass rate across all units for this series of examinations was a little disappointing at 65%. This was marginally lower than September 2016 (66%) and the lowest overall success rate since November 2009 (64%). It was noticeable that there was a far greater discrepancy between Part 1 and Part 2 papers than in previous years (90% v 53% for Retirements, 41% v 73% for Deaths and 77% v 61% for Leavers). It was also evident that, in some cases, the overall marks for some of the units were heavily influenced by a large number of entrants from the same centres either nearly all doing particularly well or, in the case of Retirements Part 2 and Deaths Part 1, nearly all achieving a lesser degree of success. Retirements Part 1 achieved the best success rate (90%), which was even higher than the impressive pass rate from September 2016 (80%). The Senior Examiners did not consider it a particularly easy paper although there was no Case Study this time round requiring candidates to revalue the GMP to ‘GMP due date’ and / or from ‘GMP due date’ to NPD for the XYZ Pension and Life Assurance Scheme (Category A) – a question type which has historically proved a challenge for many candidates. For this paper, the majority of candidates produced a faultless Letter in relation to one of the Case Studies for the RST Pension Scheme. Retirements Part 2, on the other hand, had a pass rate of only 53%, which was lower than the previous series (58%) and the lowest since May 2012 (33%). Candidates particularly struggled with the Case Study containing an AVC element (single life and joint life) for the XYZ Pension and Life Assurance Scheme (Category B). Many candidates were further confused by this Case Study being a retirement from preserved status. Somewhat surprisingly, the majority of candidates experienced difficulties in dealing with the part-time service for the Underpin pension calculation in the second of the Case Studies relating to the RST Pension Scheme. For the Letter relating to the XYZ Pension and Life Assurance Scheme (Category A), many candidates made reference to post-1988 GMP increases over and above 3% being paid by the State, when this is no longer the case with the introduction of the single-tier State Pension. There was also a number of candidates who failed to recognise that, as the associated Case Study was for a member retiring before ‘GMP due date’, different increases in payment should have been referenced for before and after this date. For Deaths Part 1, the pass rate (46%) was the lowest since records began, and significantly lower than September 2016 (86%). Candidates particularly struggled on the first two Case Studies, although the remaining Case Studies were generally well attempted. The first Case Study caused confusion as it was death in service after NPD for the XYZ Pension and Life Assurance Scheme (Category B). Most candidates did not cap the pensionable service to NPD and, additionally, did not use the correct pensionable salary or apply a late retirement factor to the pension. Further, nearly all candidates failed to cap the lump sum death benefit to the deceased member’s 75th birthday when determining the outstanding balance of pension payments.

The second Case Study was death in preservation for the XYZ Pension and Life Assurance Scheme (Category A). This again caused confusion as many candidates failed to revalue the GMP in accordance with the method detailed in the appendices to the scheme booklet. The majority of candidates also experienced difficulty in determining the WGMP, not always rounding to 52p and often erroneously calculating a pre-1988 WGMP. Some candidates also did not always make a correct reference to the lump sum death benefit being paid to the deceased member’s legal personal representatives or estate. Deaths Part 2 achieved a far higher overall pass rate than Deaths Part 1 (73%), which compared favourably with the previous series of examinations (58%) and was broadly in line with the average success rate when taken over a number of years. An area where many candidates did struggle was on the second Case Study relating to the RST Pension Scheme. As with Retirements Part 2, difficulties were encountered in dealing with the part-time service for the Underpin pension. In addition, for the Letter associated with the Case Study for the XYZ Pension and Life Assurance Scheme (Category A), many candidates made reference to WGMP increases over and above 0% (pre-1988 WGMP) and over and above 3% (post-1988 WGMP) being paid by the State, when this is no longer the case. Leavers Part 1 was generally well attempted by most candidates, with the overall pass rate (77%) being much higher than September 2016 (59%). The Case Study which caused most difficulty was the first one on the paper for the XYZ Pension and Life Assurance Scheme (Category A), where candidates were required to revalue the GMP to ‘GMP due date’ and then from ‘GMP due date’ to NPD. The pass rate for Leavers Part 2 (61%) was lower than in recent years and much lower than in the previous series (72%). As with Retirements Part 2 and Deaths Part 2, the majority of candidates struggled with the requirement to split out the part-time elements of pensionable service when determining the Underpin pension for the one Case Study relating to the RST Pension Scheme. Candidates, in general, also provided too little information in the Letter associated with the second Case Study for the OPQ Retirement & Death Benefits Plan. In many cases, candidates failed to split out the units and values by contribution type within each fund. Further, many candidates did not provide the full range of options potentially available to the member when taking benefits. Transfers had a slightly disappointing pass rate (51%), but the figure was only marginally lower than the success rate in achieved in September 2016 (54%). Many candidates dropped marks by failing to state that independent financial advice needed to be provided by an authorised adviser regulated under the Financial Services and Markets Act 2000 (as the transfer out values exceeded £30,000) for the Case Studies relating to the RST Pension Scheme and XYZ Pension and Life Assurance Scheme (Category A). For the Letter associated with the transfer in Case Study for the OPQ Retirement & Death Benefits Plan, a number of candidates did not split out the units purchased by contribution type within each fund. In addition, many candidates mentioned that the member’s written authority was required prior to the transfer in being allowed to proceed, when such authority had already been provided. Of all the papers, the overall pass rate for Transfers tends to fluctuate the most from one series of examinations to the next. It is also apparent that candidates struggle with managing their time more so with the Transfers paper than with any of the other ones. By highlighting the key areas where candidates fell short of the required standard, it is hoped that similar failings will be avoided in the next series of examinations. The final paragraphs below remain unaltered from the previous Examiners’ Report since the comments are still apt and yet still get ignored in many instances.

The Chief and Senior Examiners would advise candidates:

To clearly show their workings since arithmetical errors are penalised less harshly than errors where the cause cannot be easily identified.

To summarise calculation results at the end of a question only when the various options available are not clear from the preceding calculations.

To refrain from using a glossary either at the start of the paper or, especially, at the start of each question.

To not leave the Letters until last as more errors are incurred for an incomplete Letter than an incomplete Case Study.

The Chief and Senior Examiners would remind centres and candidates that papers will not be marked in any of the following circumstances:

Where a candidate’s personal ‘candidate number’ is missing or incorrect.

Where a candidate’s name appears anywhere on the answer script (e.g. letters signed with a name other than AN Other).

Where a centre has been proven to have followed incorrect formal procedures relating to the examinations.

The Chief and Senior Examiners also reserve the right not to mark a script where a candidate fails to follow the instructions printed on the front of the answer script and whose action causes difficulties with the marking process. The Chief and Senior Examiners continue to believe that preparation and training are the keys to success. Many candidates are fortunate to receive training organised by their centres. However, we would emphasise the necessity for training material to be kept up to date and accurate. On a final point, centres should be aware that there will be no scheme changes for the next series of examinations. However, all of the Booklets will be amended to ensure examples and appendices are up to date and the Tables of Factors will be updated to incorporate the statutory change in the Fixed Rate of GMP revaluation to 3.5% for leavers on / after 6 April 2017 (relevant to XYZ: Category A).

THE STATISTICS There were 625 entries by 314 candidates from 58 Centres. There were some absences and withdrawals leading to 577 scripts being submitted. The table below shows the number of entries for each unit, the number of scripts submitted and the pass rate.

Unit Entries Withdrawn Absent Scripts received

Pass Fail Success rate

Retirements Part 1 73 2 1 70 63 7 90%

Retirements Part 2 91 3 1 87 46 41 53%

Deaths Part 1 61 0 2 59 27 32 46%

Deaths Part 2 61 0 2 59 43 16 73%

Leavers Part 1 136 5 9 122 94 28 77%

Leavers Part 2 114 5 10 99 60 39 61%

Transfers 89

4 4 81 41 40 51%

Total

625

19

29

577

374

203

65%

KEY ERRORS WHERE CANDIDATES FAILED TO MEET THE STANDARDS

LEAVERS: PART 1 Qu.1 – (XYZ: Category A)

Final pensionable salary not always based on best year out of last five years

GMP not always revalued from date of leaving to ‘GMP due date’ in accordance with statutory method detailed in appendices of XYZ Scheme booklet

GMP revaluation from date of leaving to ‘GMP due date’ sometimes based on complete years rather than complete tax years

GMP not always revalued from ‘GMP due date’ to NPD in accordance with statutory method detailed in appendices of XYZ Scheme booklet

Member occasionally treated as being ‘male’ with revaluation for the GMP element being based on complete tax years from date of leaving to NPD

GMP not always rounded to be divisible by 52

Factors for excess revaluation from date of leaving to NPD and GMP revaluation from date of leaving to ‘GMP due date’ (and from ‘GMP due date’ to NPD) frequently not stated

Contracted-out check occasionally omitted

Pensionable service days sometimes incorrect for pre / post 1997 splits (normally by one day either side)

Qu.2 – (RST)

Pensionable service for year-to-date CARE pension and post-2006 Underpin pension often incorrect by one month (i.e. 6 April to 5 March should be eleven complete months)

Factor for revaluation from date of leaving to NPD occasionally not stated

Statement that pension all post-2006 not always mentioned

Refund calculation occasionally omitted Qu.3 – (OPQ)

Lifestyle unit holdings not always rounded to 4 decimal places (or even shown) when multiplied by investment allocation percentages (prior to multiplying by relevant unit price)

Transcription errors occasionally made for actual employer / member units and unit prices Qu.4 – (RST)

Underpin pension ‘biting’ frequently recognised but occasionally CARE pension still used for calculating pension revalued to NPD

Factor for revaluation from date of leaving to NPD not always stated

Pre / post-2006 splits for spouse’s pension revalued from date of leaving to NPD occasionally omitted

Qu.5 – (XYZ: Category B)

Factor for revaluation from date of leaving to NPD sometimes not stated Qu.6 – (Letter for Qu.2)

Reference often made to pre-2006 increases when only a post-2006 pension element applies

Actual value for spouse’s pension (and values for pre / post-2006 splits) at date of leaving revalued to NPD frequently not stated

Actual values for refund option (i.e. gross refund, tax amount and net refund) and percentage tax rate often omitted

LEAVERS: PART 2 Qu.1 – (OPQ)

Refund option not always provided even though less than 2 years’ qualifying service and date joined scheme before 1 October 2015

Value for employer element often calculated even though not required for refund calculation

Confusion occasionally experienced with AVCs being invested in Lifestyle Fund and non-AVCs being invested in specific funds

Method for deduction of tax for refund calculation not always correct Qu.2 – (XYZ: Category A)

GMP not always revalued from date of leaving to ‘GMP due date’ in accordance with statutory method detailed in appendices of XYZ Scheme booklet

GMP revaluation from date of leaving to ‘GMP due date’ sometimes based on complete years rather than complete tax years

GMP not always revalued from ‘GMP due date’ to NPD in accordance with statutory method detailed in appendices of XYZ Scheme booklet

Member occasionally treated as being ‘male’ with revaluation for the GMP element being based on complete tax years from date of leaving to NPD

GMP elements not always rounded to be divisible by 52

Accrual rates not always accurate for split periods of pensionable service

Factors for excess revaluation from date of leaving to NPD and GMP revaluation from date of leaving to ‘GMP due date’ (and from ‘GMP due date’ to NPD) frequently not stated

Qu.3 – (RST)

Part-time adjustment sometimes applied to ‘actual’ contractual salary rather than ‘full-time equivalent’ contractual salary in calculation of Underpin pension

Part-time calculation often incorrect for Underpin pension (sometimes being ignored altogether)

Factor for revaluation from date of leaving to NPD sometimes not stated

Pre / post-2006 splits for spouse’s pension revalued from date of leaving to NPD not always provided

Qu.4 – (OPQ)

Lifestyle unit holdings not always rounded to 4 decimal places (or even shown) when multiplied by investment allocation percentages (prior to multiplying by relevant unit price)

Augmentation occasionally incorrectly allocated to Lifestyle Fund Qu.5 – (XYZ: Category B)

Final pensionable salary not always based on best year out of last five years

Factor for revaluation from date of leaving to NPD occasionally not stated Qu.6 – (Letter for Qu.4)

Unit prices for each fund occasionally not always stated

Full breakdown of actual unit holdings by contribution type within each fund not always stated

Full breakdown of actual values by contribution type within each fund not always stated

Mention that member in Lifestyle Fund frequently omitted

Mention that benefits can be accessed flexibly from age 55 (or earlier if in ill-health) sometimes omitted

Options available from the scheme (annuity with/without cash and UFPLS) occasionally omitted

DEATHS: PART 1 Qu.1 – (XYZ: Category B)

Pensionable service sometimes calculated to 3 July 2011 (or date of death) rather than NPD

Final pensionable salary at NPD sometimes increased by lower of 5% / RPI

Late retirement factor not always applied

Young spouse reduction occasionally calculated even though not applicable for XYZ Scheme

Outstanding payments for lump sum death benefit often not capped to age 75 Qu.2 – (XYZ: Category A)

GMP not always revalued from date of leaving to date of death in accordance with statutory method detailed in appendices of XYZ Scheme booklet (i.e. revalued pre-1988 GMP at date of death should be derived by deducting revalued post-1988 GMP at date of death from revalued total GMP at date of death)

Splits for excess and WGMP elements for spouse’s pension occasionally not calculated (or calculated but spouse’s WGMP values not always divisible by 52)

Recipient of LSDB sometimes stated as being at discretion of trustees when reference should have been made to LSDB being paid to deceased member’s legal personal representatives / estate

Qu.3 – (RST)

Pensionable service sometimes based on date of death rather than NPD

Young spouse reduction occasionally omitted Qu.4 – (OPQ)

Start date for calculating complete months from last switch date to TRD often based on date of death rather than first day of month of death

Lifestyle unit holdings not always rounded to 4 decimal places when multiplied by investment allocation percentages (prior to multiplying by relevant unit price)

Qu.5 – (RST)

Number of instalments sometimes calculated incorrectly for balance of payments for LSDB (even when start and end dates correct)

Qu.6 – (Letter for Qu.4)

Request often made for birth / marriage certificates and bank details when not required for OPQ Plan (as no pension benefit available and LSDB paid to persons at discretion of Trustees)

DEATHS: PART 2 Qu.1 – (RST)

Spouse’s pension occasionally calculated when not applicable

Current value of AVCs frequently used for refund element of LSDB rather than using AVCs actually paid

Qu.2 – (XYZ: Category A)

Pensionable service splits for different accrual rates sometimes miscalculated when not full years (often by one day)

Splits for excess and WGMP elements for spouse’s pension occasionally not calculated (or calculated but with spouse’s WGMP values not always divisible by 52)

Qu.3 – (OPQ)

Lifestyle unit holdings for transfer in not always rounded to 4 decimal places (or even shown) when multiplied by investment allocation percentages (prior to multiplying by relevant unit price)

Transfer in sometimes ignored or dealt with incorrectly (due to being invested in Lifestyle Fund when employer / member contributions invested in non-Lifestyle Funds)

Requirement to ‘Refer to Manager’ frequently omitted (since balance of LTA exceeded) Qu.4 – (RST)

Part-time adjustment sometimes applied to ‘actual’ contractual salary rather than ‘full-time equivalent’ contractual salary in calculation of Underpin pension


Young spouse reduction factor occasionally omitted (but generally correct when applied) Qu.5 – (XYZ: Category B)

Number of instalments sometimes calculated incorrectly for balance of payments for LSDB

Enhanced spouse’s percentage occasionally not applied Qu.6 – (Letter for Qu.2)

Life assurance sometimes stated as four times salary but with no actual value being stated

Mention of varied accrual rates sometimes omitted

Splits for spouse’s pension occasionally incorrect (i.e. correct overall total stated but member GMP values provided rather than WGMP values)

Increases above 3% for post-88 WGMP and for all pre-88 WGMP frequently stated erroneously as being paid by the State

RETIREMENTS: PART 1 Qu.1 – (RST)

Early retirement factor sometimes not applied (even when correctly calculated)

Splits not always provided for pre / post-2006 residual pension

Spouse’s post-commutation pension occasionally not stated Qu.2 – (XYZ: Category A)

Pensionable service sometimes projected to NPD when not applicable for ill health and XYZ Scheme

Check to determine if residual pension exceeds GMP occasionally omitted

Qu.3 – (OPQ)

Lifestyle unit holdings not always rounded to 4 decimal places when multiplied by investment allocation percentages (prior to multiplying by relevant unit price)

Options sometimes provided for ‘No cash and joint life annuity’ when specifically not requested

Taxable element of UFPLS often not stated as being taxed at member’s marginal rate (or paid assuming an emergency code on a month 1 basis)

Mention of open market option sometimes omitted

Qu.4 – (XYZ: Category B)

Pensionable salary (prior to making the comparison) occasionally based on latest entry rather than best entry in last 5 years prior to NPD

Late retirement factor not always applied (or applied but not rounded to nearest integer)

Qu.5 – (RST)


Spouse’s post-commutation pension occasionally not stated Qu.6 – (Letter for Qu.1)

OK

RETIREMENTS: PART 2 Qu.1 – (XYZ: Category B)

Joint life AVC pension and / or single life AVC pension sometimes dealt with incorrectly

LTA percentage used not always combined for scheme pension and AVC pension

Spouse’s pension not always calculated correctly for joint life and single life AVC options

Spouse’s post-commutation pension occasionally not stated

Qu.2 – (RST)

Pensionable service sometimes not projected to NPD when should be applicable for ill health and RST Scheme

Enhanced accrual not always applied to Underpin pension (or applied but to both pre-2006 and post-2006 elements)

Spouse’s post-commutation pension occasionally not stated Qu.3 – (XYZ: Category A)

Pensionable service splits for different accrual rates occasionally miscalculated when not full years (often by one day)

Early retirement factor not always applied (even when correctly calculated)

Contracted-out check not always based on reduced pension after applying early retirement factor

Check to determine if residual pension exceeds GMP occasionally omitted Qu.4 – (RST)

Part-time calculation not always correct for year to date CARE pension



Spouse’s post-commutation pension occasionally not stated

Mention of young spouse often omitted Qu.5 – (OPQ)

Transcription errors sometimes made with unit prices (or unit prices not always matched to correct funds)

Spouse’s pension not always quoted when calculating member’s joint life annuity

Annuity bureau charge not always included in LTA calculation

Taxable element of UFPLS often not stated as being taxed at member’s marginal rate (or paid assuming an emergency code on a month 1 basis)

Mention of open market option frequently omitted Qu.6 – (Letter for Qu.3)

Mention of varied accrual rates not always mentioned

Increase rates often not split out to detail the position before / after GMP Due Date

Increases above 3% for post-88 WGMP frequently stated erroneously as being paid by the State

TRANSFERS Qu.1 – (RST)

Statement not always provided of requirement to take independent financial advice from an authorised adviser regulated under the Financial Services and Markets Act 2000 if transferring to an arrangement where benefits can be accessed flexibly (as transfer value exceeds £30,000) or – more commonly – statement provided but without reference to specific requirement to be regulated under the Financial Services and Markets Act 2000

Qu.2 – (OPQ)

Occasional transcription errors with unit prices for one or more funds

Qu.3 – (XYZ)

Age next birthday occasionally miscalculated by one year

Statement not always provided of requirement to take independent financial advice from an authorised adviser regulated under the Financial Services and Markets Act 2000 if transferring to an arrangement where benefits can be accessed flexibly (as transfer value exceeds £30,000) or – more commonly – statement provided but without specific reference to requirement to be regulated under the Financial Services and Markets Act 2000

Qu.4 – (RST)

Age next birthday occasionally miscalculated by one year

Full list of attaching benefits (where provided) not always accurate (e.g. no spouse’s pension exists on death-in-deferment)

Qu.5 – (OPQ)

Lifestyle unit holdings not always rounded to 4 decimal places when multiplied by investment allocation percentages (prior to dividing by relevant unit price)

AVCs often treated as being in Lifestyle Fund Qu.6 – (XYZ)

Full list of attaching benefits not always accurate (e.g. no mention of lump sum death benefit on death after retirement or no clear indication that refund only payable on death before retirement)

Qu.7 – (Letter for Qu.3)

Full list of items required to be communicated in relation to transfer value frequently omitted; particularly in relation to regulatory requirements when TV exceeds £30,000

Mention of requirement not to give financial advice sometimes omitted Qu.8 – (Letter for Qu.5)

Breakdown of individual units by contribution type within each fund frequently omitted (although total units for each fund usually provided)

Statement often wrongly provided mentioning the requirement for member’s written authority to proceed (when transfer in of benefits has already taken place)

SUMMARY OF WORKED ANSWERS

Leavers Part 1 – Question 1 Calculation (1) Preserved pension at date of leaving of £14,088.85 p.a. (excess over GMP = £14,030.09 p.a.

and post-1988 GMP = £58.76 p.a.) which, when revalued to NPD, could result in a maximum pension of £50,122.97 p.a. (excess over GMP = £49,886.37 p.a. and post-1988 GMP = £236.60 p.a.)

Spouse’s pension on death before / after retirement of £7,044.43 p.a. (based on member’s pension at DOL) which, when revalued to NPD, could result in a maximum pension of £25,061.49 p.a. (based on member’s pension at DOL revalued to NPD)

OR (2) Transfer value to another pension arrangement

Leavers Part 1 – Question 2 Calculation (1) Net refund of £1,561.31 OR (2) Preserved pension at date of leaving of £527.08 p.a. {v Underpin pension of £431.25 p.a.} (all

post-2006) which, when revalued to NPD, would result in a pension of £885.27 p.a. (all post-2006 – assuming increases of 2.5% per annum compound)

Spouse’s pension on death after retirement of £210.83 p.a. (all post-2006 – based on member’s pension at DOL) which, when revalued to NPD, would result in a pension of £354.11 p.a. (all post-2006 – based on member’s pension at DOL revalued to NPD assuming increases of 2.5% per annum compound)


Letter (Part 1 - Question 6) (1) Date of leaving (05/03/2017) (2) Preserved pension at date of leaving (£527.08 p.a.), which is all post-2006 (3) Revaluation rate to NPD (lower of 5.0% / CPI) (4) Mention member’s NPD (17/08/2038) or specific age at NPD (65) (5) Pension at NPD (£885.27 p.a. {assuming increases of 2.5% per annum compound}), which is all

post-2006 (6) Mention tax-free cash sum option on retirement

(7) Death before retirement - Refund of contributions of (£1,951.64)

(8) Death after retirement - Spouse’s pension (£210.83 p.a. {based on member’s pension at DOL} which, when

revalued to NPD, would result in a pension of £354.11 p.a. {based on member’s pension at DOL revalued to NPD assuming increases of 2.5% per annum compound})

- LSDB (provided death occurs before 5 years of pension payments) (9) Post retirement increases

- Post-2006 (lower of 2.5% / RPI) (10) Mention refund option

- Total refund (£1,561.31) - Contributions paid (£1,951.64) - Tax deducted (£390.33) - Tax rate (20%)

(11) Mention transfer option

Leavers Part 1 – Question 3 Calculation (1) Preserved benefit of £100,738.30 OR (2) Transfer value to another pension arrangement

Leavers Part 1 – Question 4 Calculation (1) Preserved pension at date of leaving of £12,008.33 p.a. {v CARE pension of £11,717.73 p.a.}

(pre-2006 = £6,050.00 p.a. and post-2006 = £5,958.33 p.a.) which, when revalued to NPD, would result in a pension of £15,371.62 p.a. (pre-2006 = £7,744.48 p.a. and post-2006 = £7,627.14 p.a. – assuming increases of 2.5% per annum compound)

Spouse’s pension on death after retirement of £4,803.33 p.a. (pre-2006 = £2,420.00 p.a. and post-2006 = £2,383.33 p.a. – based on member’s pension at DOL) which, when revalued to NPD, would result in a pension of £6,148.65 p.a. (pre-2006 = £3,097.79 p.a. and post-2006 = £3,050.86 p.a. – based on member’s pension at DOL revalued to NPD assuming increases of 2.5% per annum compound)


Leavers Part 1 – Question 5 Calculation (1) Preserved pension at date of leaving of £20,049.26 p.a. which, when revalued to NPD, could

result in a maximum pension of £32,658.04 p.a.



Leavers Part 2 – Question 1 Calculation (1) Net refund of £19,502.06 OR (2) Transfer value to another pension arrangement

Leavers Part 2 – Question 2 Calculation NOTE: There was an inconsistency / ambiguity with dates for accrual rates on the examination paper for this question. The Examiners therefore accepted two alternative interpretations on the marking schedule. (1a) Preserved pension at date of leaving of £25,482.14 p.a. (excess over GMP = £23,961.66 p.a.,

pre-1988 GMP = £244.40 p.a. and post-1988 GMP = £1,276.08 p.a.) which, when revalued to NPD, could result in a maximum pension of £32,946.23 p.a. (excess over GMP = £30,581.79 p.a., pre-1988 GMP = £335.40 p.a. and post-1988 GMP = £2,029.04 p.a.)


OR (Alternative answer)

(1b) Preserved pension at date of leaving of £24,440.82 p.a. (excess over GMP = £22,920.34 p.a., pre-1988 GMP = £244.40 p.a. and post-1988 GMP = £1,276.08 p.a.) which, when revalued to NPD, could result in a maximum pension of £31,617.21 p.a. (excess over GMP = £29,252.77 p.a., pre-1988 GMP = £335.40 p.a. and post-1988 GMP = £2,029.04 p.a.)



Leavers Part 2 – Question 3 Calculation (1) Preserved pension at date of leaving of £3,825.21 p.a. {v Underpin pension of £3,070.00 p.a.}

(pre-2006 = £503.65 p.a. and post-2006 = £3,321.56 p.a.) which, when revalued to NPD, would result in a pension of £6,750.01 p.a. (pre-2006 = £888.75 p.a. and post-2006 = £5,861.26 p.a. – assuming increases of 2.5% per annum compound)

Spouse’s pension on death after retirement of £1,530.08 p.a. (pre-2006 = £201.46 p.a. and post-2006 = £1,328.62 p.a. – based on member’s pension at DOL) which, when revalued to NPD, would result in a pension of £2,700.00 p.a. (pre-2006 = £355.50 p.a. and post-2006 = £2,344.50 p.a. – based on member’s pension at DOL revalued to NPD assuming increases of 2.5% per annum compound)


Leavers Part 2 – Question 4 Calculation (1) Preserved benefit of £296,681.57 OR (2) Transfer value to another pension arrangement

Letter (Part 2 – Question 6) (1) Date of leaving (06/03/2017) (2) Personal Retirement Account at leaving (£296,681.57), stating:

- Unit price of each fund (optional) - Number of units in each fund (including splits by contribution type) - Fund values for each fund (including splits by contribution type)

(3) Mention augmentation (4) Mention member’s options on leaving:

- Funds remain invested (and cannot be accessed until age 55, or earlier if in ill health) - Transfer option

(5) Mention annual statements will be issued if funds remain invested (6) Mention member is in Lifestyle Fund and state TRD (17/08/2020) or NPD (17/02/2030) (7) Mention options available when taking benefits from the Plan:

- Full annuity using ‘Annuity Bureau’ factors (single life v joint life and increasing v non-increasing) without tax-free cash sum

- Reduced annuity using ‘Annuity Bureau’ factors (single life v joint life and increasing v non-increasing) with tax-free cash sum

- Single Uncrystallised Funds Pension Lump Sum (8) Mention benefits on death before retirement

- Value of Personal Retirement Account paid to Legal Personal Representatives

Leavers Part 2 – Question 5 Calculation (1) Preserved pension at date of leaving of £12,201.23 p.a. (including transfer in of

£1,645.32 p.a.) which, when revalued to NPD, could result in a maximum pension of £50,221.97 p.a.



Deaths Part 1 – Question 1 Calculation (1) Lump sum death benefit (equal to 5 years’ member pension instalments [but capped to age

75] since death in service after NPD {Category B}) of £33,022.97 payable at Trustees’ Discretion – [LTA used = 3.30%]

PLUS (2) Spouse’s pension of £11,007.66 p.a.

Deaths Part 1 – Question 2 Calculation (1) Lump sum death benefit (refund of contributions only since death in deferment {Category A})

of £9,149.70 payable to Legal Personal Representatives / Estate – [LTA used = 0.91%]

PLUS (2) Spouse’s pension of £3,854.80 p.a. (excess over GMP = £2,384.24 p.a. and post-1988 GMP =

£1,470.56 p.a.)

Deaths Part 1 – Question 3 Calculation (1) Lump sum death benefit (refund of contributions of £46,907.01 plus life assurance of

£118,750.00 since death in service before NPD) of £165,657.01 payable at Trustees’ Discretion – [LTA used = 16.56%]

PLUS (2) Spouse’s pension of £5,699.67 p.a. (pre-2006 = £1,377.07 p.a. and post-2006 = £4,322.60 p.a.

{including young spouse reduction})

Deaths Part 1 - Question 4 Calculation (1) Lump sum death benefit (refund of Personal Retirement Account of £472,632.13 plus life

assurance of £298,500.00 since death in service before NPD) of £771,132.13 payable at Trustees’ Discretion – [LTA used = 77.11%]

Letters (Part 1 – Question 6) (1) Date of death (28/02/2017) (2) Total lump sum payable at Trustees’ Discretion (£771,132.13), stating:

- Refund of Personal Retirement Account (£472,632.13) - Life assurance (298,500.00)

(3) Lifetime allowance: - Percentage used by lump sum death benefit (77.11%) - Counts against deceased member

(4) Action required: - Member’s death certificate

Deaths Part 1 – Question 5 Calculation (1) Lump sum death benefit (equal to balance of 5 years’ member pension instalments since

death in retirement) of £6,942.06 payable at Trustees’ Discretion – [LTA used = 0.69%] PLUS (2) Spouse’s pension of £2,919.54 p.a. (pre-2006 = £1,215.07 p.a. and post-2006 = £1,704.47 p.a.)

Deaths Part 2 – Question 1 Calculation (1) Lump sum death benefit (refund of contributions of £27,527.50 and refund of AVCs of

£4,260.05 since death in deferment) of £31,787.55 payable at Trustees’ Discretion – [LTA used = 3.17%]

Deaths Part 2 – Question 2 Calculation (1) Lump sum death benefit (refund of contributions of £38,986.24 plus life assurance of

£131,845.04 since death in service before NPD {Category A}) of £170,831.28 payable at Trustees’ Discretion – [LTA used = 17.08%]

PLUS (2) Spouse’s pension of £9,439.73 p.a. (excess over WGMP = £7,927.05 p.a., pre-1988 WGMP =

£454.48 p.a. and post-1988 WGMP = £1,058.20 p.a.)

Letter (Part 2 – Question 6) (1) Date of death (25/01/2017) (2) Total lump sum payable at Trustees’ Discretion (£170,831.28), stating:

- Refund of contributions (£38,986.62) - Life assurance (£131,845.04)

(3) Spouse’s pension (£9,439.73 p.a.), stating: - Excess over WGMP split (£7,927.05 p.a.) - Pre-1988 WGMP split (£454.48 p.a.) - Post-1988 WGMP split (£1,058.20 p.a.) - Commencement date (01/02/2017) - Rates of increase (excess over WGMP = lower of 5.0% / RPI, pre-1988 WGMP = zero

and post-1988 WGMP = lower of 3.0% / CPI) - Frequency of payment (monthly) - Increase date (1st April each year)

(4) Lifetime allowance: - Percentage used by lump sum death benefit (17.08%) - Counts against deceased member

(5) Action required: - Member’s death certificate - Spouse’s birth & marriage certificates - Bank details

Deaths Part 2 – Question 3 Calculation (1) Lump sum death benefit (refund of Personal Retirement Account of £636,930.70 plus life

assurance of £436,800.00 since death in service before NPD) of £1,073,730.70 payable at Trustees’ Discretion – [LTA used = 107.37% - must mention requirement to refer to manager]

Deaths Part 2 – Question 4 Calculation NOTE: There was an inconsistency / ambiguity with amounts for Contractual Salary (actual and full-time equivalent) on the examination paper for this question. The Examiners therefore accepted two alternative interpretations on the marking schedule. (1a) Lump sum death benefit (refund of contributions of £132,869.77 plus life assurance of

£218,300.00 since death in service after NPD) of £351,169.77 payable at Trustees’ Discretion – [LTA used = 35.11%]

OR (Alternative answer) (1b) Lump sum death benefit (refund of contributions of £132,869.77 plus life assurance of

£152,810.00 since death in service after NPD) of £285,649.77 payable at Trustees’ Discretion – [LTA used = 28.56%]

PLUS (2) Spouse’s pension of £14,446.04 p.a. (pre-2006 = £8,171.86 p.a. and post-2006 =

£6,274.18 p.a. {including young spouse reduction})

Deaths Part 2 – Question 5 Calculation (1) Lump sum death benefit (equal to balance of 5 years’ member pension instalments since

death in retirement {Category B}) of £4,760.47 payable at Trustees’ Discretion – [LTA used = 0.47%]

PLUS (2) Spouse’s pension of £3,815.07 p.a.

Retirements Part 1 – Question 1 Calculation

Options (1) Full pension of £16,296.77 p.a. {vs Underpin pension of £10,917.96 p.a.} (pre-2006 =

£8,352.86 p.a. and post-2006 = £7,943.91 p.a.) with a spouse’s pension of £6,518.70 p.a. (pre-2006 = £3,341.14 p.a. and post-2006 = £3,177.56 p.a.) – [LTA used = 32.59%]

OR (2) Pension commencement lump sum of £75,060.86 – [LTA used = 7.50%]

PLUS Residual pension of £11,259.13 p.a. (pre-2006 = £8,352.36 p.a. and post-2006 = £2,906.27 p.a.) with a spouse’s pension of £6,518.70 p.a. (pre-2006 = £3,341.14 p.a. and post-2006 = £3,177.56 p.a.) – [LTA used = 22.51%]

Letter (Part1 – Question 6) (1) Date of retirement (06/03/2016) (2) Options available:

- Full pension (£16,296.77 p.a.), which is split as follows: - Pre-2006 (£8,352.86 p.a.) - Post-2006 (£7,943.91 p.a.) OR - PCLS (£75,060.86), PLUS - Residual pension (£11,259.13 p.a.), which is split as follows: - Pre-2006 (£8,352.86 p.a.) - Post-2006 (£2,906.27 p.a.)

(3) Details of pension: - Commencement date (01/04/2017) - Frequency of payment ( monthly) - Increase rates: - Pre-2006 (lower of 5.0% / RPI) - Post-2006 (lower of 2.5% / RPI) - Increase date (Anniversary of date of commencement) (4) Details of spouse’s pension payable on death of member:

- Spouse’s pension (£6,518.70 p.a.) (5) Mention LSDB payable on death within 5 years of retirement (6) Lifetime allowance: - Percentage used by full pension (32.59%)

- Percentage used by PCLS (7.50%) and residual pension (22.51%) (7) Action required: - Choice of option - Member’s birth certificate - Bank details


Options (1) Full pension of £13,948.06 p.a. (excess over GMP = £12,578.90 p.a. and post-1988 GMP =

£1,369.16 p.a.) with a spouse’s pension of £6,974.03 p.a. – [LTA used = 27.89%] OR (2) Pension commencement lump sum of £65,758.06 – [LTA used = 6.57%]

PLUS

Residual pension of £9,863.71 p.a. (excess over GMP = £8,494.55 p.a. and post-1988 GMP = £1,369.16 p.a.) with a spouse’s pension of £6,974.03 p.a. – [LTA used = 19.72%]

Retirements Part 1 – Question 3 Calculation Value of Personal Retirement Account = £105,038.83 Options (1) Pension commencement lump sum of £26,259.71 – [LTA used = 2.62%]

PLUS

Pension of £5,903.93 p.a. (non-increasing) with spouse’s pension of £2,951.97 p.a. – [LTA used = 7.87%] – {Annuity Bureau Charge of £60.00}


PLUS

Pension of £4,557.84 p.a. (increasing at lower of 3.0% / RPI) with spouse’s pension of £2,278.92 p.a. – [LTA used = 7.87%] – {Annuity Bureau Charge of £60.00}

OR (3) Single Uncrystallised Funds Pension Lump Sum of £105,038.83 (tax-free element = £26,259.71

and taxable element = £78,779.12, which is taxed at member’s marginal rate and paid assuming an Emergency Code on a Month 1 basis) – [LTA used = 10.50%]

OR (4) Open Market Option


Options (1) Full pension of £18,549.71 p.a. with a spouse’s pension of £9,274.86 p.a. – [LTA used =

37.09%] OR (2) Pension commencement lump sum of £82,498.04 – [LTA used = 8.24%]

PLUS

Residual pension of £12,374.71 p.a. with a spouse’s pension of £9,274.86 p.a. – [LTA used = 24.74%]



£890.27 p.a. and post-2006 = £9,534.05 p.a.) with a spouse’s pension of £4,169.73 p.a. (pre-2006 = £356.11 p.a. and post-2006 = £3,813.62 p.a.) – [LTA used = 20.84%]


PLUS

Residual pension of £7,028.78 p.a. (pre-2006 = £890.27 p.a. and post-2006 = £6,138.51 p.a.) with a spouse’s pension of £4,169.73 p.a. (pre-2006 = £356.11 p.a. and post-2006 = £3,813.62 p.a.) – [LTA used = 14.05%]


Option 1A – Pension Only (AVCs: single life) (1A) Full pension [excluding single life AVC pension] of £11,387.82 p.a. (plus AVC single life pension

of £1,037.60 p.a. = £12,425.42 p.a.) with a spouse’s pension of £5,693.91 p.a. – [LTA used = 24.85%]

OR

Option 1B – Pension Only (AVCs: joint life) (1B) Full pension [excluding joint life AVC pension] of £11,387.82 p.a. (plus AVC joint life pension of

£898.08 p.a. = £12,285.90 p.a.) with a spouse’s pension of £5,693.91 p.a. (plus AVC joint life pension of £449.04 p.a. = £6,142.95 p.a.}) – [LTA used = 24.57%]

OR Option 2 – Pension and Cash (2) Pension commencement lump sum of £56,111.38 (including AVC cash of £19,687.30) – [LTA

used = 5.61%]

PLUS

Residual pension of £8,748.39 p.a. with a spouse’s pension of £5,693.91 p.a. – [LTA used = 17.49%]





PLUS Residual pension of £27,553.11 p.a. (pre-2006 = £21,223.92 p.a. and post-2006 = £6,329.19 p.a.) with a spouse’s pension of £16,123.67 p.a. (pre-2006 = £8,489.57 p.a. and post-2006 = £7,634.10 p.a.) – [LTA used = 55.10%]


Options (1) Full pension of £20,523.52 p.a. (excess over GMP = £19,626.00 p.a. and post-1988 GMP =

£897.52 p.a.) with a spouse’s pension of £10,261.76 p.a. – [LTA used = 41.04%] OR

(2) Pension commencement lump sum of £95,747.67 – [LTA used = 9.57%] PLUS

Residual pension of £14,362.15 p.a. (excess over GMP = £13,464.63 p.a. and post-1988 GMP = £897.52 p.a.) with a spouse’s pension of £10,261.76 p.a. – [LTA used = 28.72%]

Letter (Part 2 – Question 6) (1) Date of retirement (05/03/2017) (2) Options available:

- Full pension (£20,523.52 p.a.), which is split as follows: - Excess over GMP (£19,626.00 p.a.) - Post-1988 GMP (£897.52 p.a.) OR - PCLS (£95,747.67), PLUS - Residual pension (£14,362.15 p.a.), which is split as follows: - Excess over GMP (£13,464.63 p.a.) - Post-1988 GMP (£897.52 p.a.)

(3) Details of pension: - Commencement date (01/04/2017) - Frequency of payment ( monthly) - Increase rates up to ‘GMP due date’: - Total pension (lower of 5.0% / RPI) - Increase rates from ‘GMP due date’: - Excess over GMP (lower of 5.0% / RPI) - Post-1988 GMP (lower of 3.0% / CPI) - Increase date (1st April each year) (4) Details of spouse’s pension payable on death of member:

- Spouse’s pension (£10,261.76 p.a.) (5) Mention enhanced accrual rate (6) Mention LSDB payable on death within 5 years of retirement (7) Lifetime allowance: - Percentage used by full pension (41.04%)

- Percentage used by PCLS (9.57%) and residual pension (28.72%) (8) Action required: - Choice of option - Member’s birth certificate - Bank details

Retirements Part 2 – Question 4 Calculation Options (1) Full pension of £21,290.34 p.a. {vs Underpin pension of £11,544.83 p.a.} (pre-2006 =


OR

(2) Pension commencement lump sum of £95,702.51 – [LTA used = 9.57%] PLUS

Residual pension of £14,355.38 p.a. (pre-2006 = £3,226.59 p.a. and post-2006 = £11,128.79 p.a.) with a spouse’s pension of £8,516.13 p.a. (pre-2006 = £1,290.63 p.a. and post-2006 = £7,225.50 p.a.) – [LTA used = 28.71%]

Retirements Part 2 – Question 5 Calculation Value of Personal Retirement Account = £156,357.31 (including TV-in of £15,406.02) Option 1 – No Cash (1) Pension of £11,799.07 p.a. (non-increasing) with spouse’s pension of £5,899.54 p.a. – [LTA

used = 15.63%] – {Annuity Bureau Charge of £78.18} OR (2) Pension of £9,548.65 p.a. (increasing at lower of 2.5% / RPI) with spouse’s pension of

£4,774.33 p.a. – [LTA used = 15.63%] – {Annuity Bureau Charge of £78.18} Option 2 – With Cash (3) Pension commencement lump sum of £39,089.33 – [LTA used = 3.90%]

PLUS

Pension of £8,849.20 p.a. (non-increasing) with spouse’s pension of £4,424.60 p.a. – [LTA used = 11.72%] – {Annuity Bureau Charge of £60.00}


PLUS

Pension of £7,161.41 p.a. (increasing at lower of 2.50% / RPI) with spouse’s pension of £3,580.71 p.a. – [LTA used = 11.72%] – {Annuity Bureau Charge of £60.00}

OR (5) Uncrystallised Funds Pension Lump Sum of £156,357.31 (tax-free element = £39,089.33 and

taxable element = £117,267.98, which is taxed at member’s marginal rate and paid assuming an Emergency Code on a Month 1 basis) – [LTA used = 15.63%]

OR (6) Open Market

Transfers – Question 1 Calculation Total Transfer Value of £91,687.51, which includes the post-1997 Transfer Value of £81,554.06 (member additionally has an AVC Fund Value of £15,119.33) – mention requirement for independent financial advice from authorised adviser regulated under Financial Services & Markets Act 2000 if transferring to an arrangement where benefits can be accessed flexibly (as TV exceeds £30,000)

Transfers – Question 2 Calculation Total Transfer Value of £33,375.42 (including £8,512.96 in respect of AVCs), which is split between Funds and Contribution Types as follows: Global Equity Fund Member Contributions - £4,816.69 Employer Contributions - £7,706.71 Total - £12,523.40 Index Linked Bond Fund Member Contributions - £953.39 Employer Contributions - £1,525.42 Total - £2,478.81 Balanced Fund Member Contributions - £2,243.86 Employer Contributions - £3,590.18 AVCs - £3,167.86 Total - £9,001.90 Corporate Bond Fund Member Contributions - £1,548.54 Employer Contributions - £2,477.67 AVCs - £4,437.67 Total - £8,463.88 Cash Fund AVCs - £907.43 Total - £907.43

Transfers – Question 3 Calculation Total Transfer Value of £61,782.21, which includes the post-1997 Transfer Value of £57,475.84 (member additionally has an AVC Fund Value of £12,871.74) – mention requirement for independent financial advice from authorised adviser regulated under Financial Services & Markets Act 2000 if transferring to an arrangement where benefits can be accessed flexibly (as TV exceeds £30,000).

Letter (Relating to Question 3)

(1) Total Transfer Value excluding AVCs (£61,782.21) (2) Total Transfer Value including AVCs (£74,653.95 {of which AVCs = £12,871.74}) (3) Post-1997 element of Transfer Value (£57,475.84) (4) Mention option to transfer to a suitable alternative pension arrangement (5) Mention (if member transferring to an arrangement where benefits can be accessed flexibly): - requirement to take independent financial advice from an authorised adviser

regulated under Financial Services and Markets Act 2000 should the transfer proceed - requirement to apply in writing to Trustees for transfer within 3 months of guarantee

date (date on which transfer was calculated) - requirement to confirm to Trustees within 3 months of receiving transfer quotation

that independent financial advice has been received - Trustees will verify within 6 months of guarantee date that independent financial

advice has been received and carry out transfer - Trustees will (unless they hear to the contrary) assume transfer will be to an

arrangement where benefits can be accessed flexibly (6) Mention that financial advice cannot be given (7) Reference to “Pension Scams” (8) Provide statement that if transfer proceeds, no benefits will remain in XYZ Pension and Life

Assurance Scheme

Transfers – Question 4 Calculation (1) At NPD, a pension of £13,962.38 p.a. (including post-1997 pension of £13,259.95 p.a.) would

be payable (2) On death before retirement a refund of member contributions would be payable (3) On death after retirement a lump sum death benefit would be payable (provided death occurs

within 5 years of retirement) and a spouse’s pension would also be payable (4) All benefits will be payable in accordance with the provisions of the RST Pension Scheme

Transfers – Question 5 Calculation The Transfer-in of £25,924.55 would buy units in the member’s Personal Retirement Account split between Funds and Contribution Types as follows: Global Equity Fund – (Lifestyle) Member Contributions - 2,023.8102 units Employer Contributions - 1,983.0018 units Total - 4,006.8120 units Index Linked Bond Fund – (Lifestyle) Member Contributions - 208.5522 units Employer Contributions - 204.3469 units Total - 412.8991 units

Cash Fund – (Lifestyle) Member Contributions - 89.0511 units Employer Contributions - 87.2556 units Total - 176.3067 units Balanced Fund – (non-Lifestyle) AVCs - 998.5374 units Total - 998.5374 units

Letter (Relating to Question 5) (1) Transfer Value (£25,924.55)

- Member’s contributions (£10,911.45) - Employer’s contributions (£10,691.43) - AVCs (£4,321.67)

(2) Global Equity Fund – Lifestyle (4,006.8120 units) - Member’s contributions (2,023.8102 units) - Employer’s contributions (1,983.0018 units)

(3) Index Linked Bond Fund – Lifestyle (412.8991 units) - Member’s contributions (208.5522 units) - Employer’s contributions (204.3469 units)

(4) Cash Fund – Lifestyle (176.3067 units) - Member’s contributions (89.0511 units) - Employer’s contributions (87.2556 units)

(5) Balanced – non-Lifestyle (998.5374 units) - Member’s contributions (998.5374 units)

(6) Penalty if financial advice ‘actually’ given (7) Penalty if member’s written authority to proceed mentioned (as transfer in has already

occurred and written authority has already been received) (8) Penalty if ‘Guarantee’ period mentioned (as not relevant for OPQ Retirement & Death

Benefits Plan and transfer in has already occurred) (9) Provide statement that no benefits remain in previous scheme (10) Provide statement that benefits are subject to rules of OPQ Retirement & Death Benefits Plan

Transfers – Question 6 Calculation (1) At NPD, a pension of £9,930.55 p.a. (including excess pension of £9,625.31 p.a. and post-1988

GMP of £305.24 p.a. {and including post-1997 pension of £9,475.97 p.a.}) would be payable (2) On death before retirement before NPD a refund of contributions would be payable and a

spouse's pension revalued to date of death would also be payable (3) On death before retirement on or after NPD a lump sum death benefit would be payable

(calculated on the assumption that the member retired on the date of death) and a spouse’s pension would also be payable

(4) On death after retirement a lump sum death benefit would be payable (provided death occurs within 5 years of retirement) and a spouse’s pension would also be payable

(5) All benefits will be payable in accordance with the provisions of the XYZ Pension and Life Assurance Scheme

vq examiners’ report march 2017...vq examiners’ report march 2017 the total number of entries...

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