DETERMINE PENSION SCHEME DEATH BENEFITS

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1 This unit involves: Manually calculating and quoting death benefits for members of three different pension schemes: OPQ Scheme money purchase, option to contract out RST Scheme career average revalued earnings, not contracted out XYZ Scheme final salary, contracted out It is made up of 2 elements: Element 8.1 Element 8.2 Calculate death benefits for members Quote death benefits to the beneficiary, sponsor or Trustee TAKE NOTE: ALL Performance Criteria and Scope, Knowledge and Understanding are evidenced through external assessment. External assessment takes the form of case study examinations set twice yearly May and November. The case study examinations are set in two parts. Part 1 contains case studies for deceased members with core scheme benefits only. Part 2 contains case studies for deceased members who, in addition to core scheme benefits, have supplementary or discretionary benefits listed within the Scope. This could mean that overall benefits for Part 2 case studies need to be tested against HM Revenue & Customs limits. Candidates are allowed to take any reference materials into the examinations with them. However, it is recommended that they fully prepare themselves in advance to avoid wasting valuable time searching for information. RESOURCES There is an on-line learning facility available for this unit. This provides a complete learning process including practising on old examination papers. There is a facility for feedback and progress can be monitored. There is a demonstration of this facility on

2 Element 8.1 Calculate death benefits for members PERFORMANCE CRITERIA You must show you can: 1. use the correct personal details from the member s record 2. show the full range of requested options which are allowed based on the member s record, the scheme rules and legislation 3. apply scheme definitions accurately 4. take into account any supplementary and discretionary benefits* 5. apply all relevant legislation correctly, according to the date of death and the date of joining the scheme 6. set out the calculations for each option according to accepted procedures 7. carry out the calculations manually for each option without arithmetical errors 8. show when lump sum benefits are payable at the Trustees discretion or to the deceased member s Estate 9. calculate and provide information relating to HM Revenue & Customs Regulations, as appropriate SCOPE In meeting the performance criteria you must show you can: 1. identify and apply scheme rules and definitions for all of the following: a) final salary b) career average earnings c) money purchase d) not contracted out of SERPS/S2P e) contracted out of SERPS/S2P 3. take into account all of the following supplementary and discretionary benefits*: a) split accruals, breaks in service and/or part time service b) transfers in c) retained benefits d) additional voluntary contributions e) augmentations 4. set out and provide fully worked manual calculations for all of the following death benefit: a) refund of contributions b) lump sums c) dependants pensions 5. set out and provide fully worked manual calculations for all of the following death benefit categories: a) in service b) from deferment c) from pension in payment 6. identify when lump sum benefits are payable for both of the following: a) at the Trustees discretion b) to the deceased member s Estate

3 6. determine the options open to members taking into account all of the following: a) the member s record b) scheme rules c) relevant legislation EXPLANATION *Supplementary and discretionary benefits will appear in Part 2 case studies only Calculations could include recalculating benefits to ensure minimum contracting-out requirements are met or suggesting a course of action if Inland Revenue limits are exceeded.

4 Element 8.2 Quote death benefits to the beneficiary, sponsor or Trustee PERFORMANCE CRITERIA You must show you can: 1. use correct personal member information 2. quote benefits which match your calculations 3. identify supplementary and discretionary benefits* 4. show the benefit options in an approved format and in accordance with accepted procedure 5. provide complete and accurate information to accompany the quotation and requested payment details 6. give instructions to the addressee on the response you require SCOPE In meeting the performance criteria you must show you can: 1. use the calculations from the case studies completed to write a letter to the beneficiary, sponsor or Trustees. 2. take into account the following supplementary and discretionary benefits*: a) split accruals, breaks in service and/or part time service b) transfers in c) retained benefits d) additional voluntary contributions e) augmentations 3. identify when lump sum benefits are payable for both of the following: a) at the Trustees discretion b) to the deceased member s Estate EXPLANATION *Supplementary and discretionary benefits will appear in Part 2 case studies only Calculations could include recalculating benefits to ensure minimum contracting-out requirements are met or suggesting a course of action if Inland Revenue limits are exceeded. One letter is required in Part 1 and two letters are required in Part 2

5 Knowledge and Understanding You need to show that you know and understand: K1 K2 K3 K4 K5 K6 K7 K8 K9 K10 K11 The scheme rules for each of the schemes used in the case study examinations covering the payment of death benefits How to apply actuarial factors How to apply annuity rates The effects of overriding legislation on the benefits and options payable including the requirements of the HM Revenue & Customs and the Department for Work and Pensions How the benefit is made up: refund of contributions, life assurance, 5 year guarantee, spouses /dependants pensions, GMP/Protected Rights Statutory increases on deferred pension for period between date of exit and death Statutory increases on pensions in payment The Disclosure requirements The distinction between giving financial information and financial advice (in accordance with the latest Financial Services and Markets Act) The distinction between paying lump sum benefits at the Trustees discretion or to the deceased member s Estate What information and documentation is required before the scheme can settle the benefits