Defined Benefit Checklist

Transcription

1 For Adviser use only it's not for use with clients Defined Benefit Checklist This Checklist aims to help you examine, audit and sense-check the benefits that could be derived from your client s defined benefit scheme and specifically how these satisfy your client s aims and objectives for their retirement journey. It is acknowledged that any benefits under such a defined benefit arrangement will by their nature be valuable. These benefits vary and may comprise of tax-free cash, dependant s provision and income guarantees. When dealing with a client who is a member of a defined benefit scheme, it is normally recognised that the best course of action is for the member to remain in the scheme. Any change to this requires full analysis and documentation and must be in the client's best interest. How to use the Checklist: > Part 1 Client's defined benefit scheme details > Part 2 Client's aims and objectives > Part 3 Sense check Client's defined benefit scheme details versus client's aims and objectives The Checklist aims to enable an initial conversation between you and your client regarding their defined benefit pension scheme benefits in the wider context of pension freedoms and to help determine whether the services of a pension transfer specialist are required. It then starts by asking you to analyse your client's benefits available through the defined benefit scheme comparing them with your client's aims and objectives. There will be an holistic interpretation required given the wider context of the client's personal and financial situation. Your analysis may need to explore and compare alternatives. Client details Client name Adviser name Scheme name/sponsoring employer Administrators Scheme rmal Retirement Date (NRD) Client age Page 1 of 8

2 Part 1 Client's defined benefit scheme details Is your client an active or deferred member? Active Deferred Is your client within 12 months of, or beyond NRD? If so, does the scheme allow a non-statutory transfer? Is the scheme an unfunded public sector pension scheme? [As of April 2015 members of unfunded public sector pension schemes are no longer able to transfer out, although some transfers to other unfunded public sector schemes may still be permitted. The Local Government Pension Scheme (LGPS) is a funded arrangement so transfers from this scheme are still permitted.] Is a guaranteed scheme pension offered at NRD or earlier date if required by the client? Are there any penalties or early retirement reductions? Please record comments below: Lump sum/cash Does the scheme offer lump sum/cash benefits? Please record comments below: Escalation basis Guarantee basis/terms Page 2 of 8

3 Part 1 Client's defined benefit scheme details continued Early retirement terms Dependant's benefits Please record any details (i.e definition of spouse, any other dependants and escalation basis below): Ancillary benefits Please record any details (e.g. any other death benefits, discounts or concessions) below: Financial status of scheme Please record the solvency position of the scheme and/or employer and document any evidence of a recovery plan or additional relevant information below: Does the scheme offer a partial transfer option? Please record any details below: Page 3 of 8

4 Part 2 Client's aims and objectives Financial The scheme may pay an indexed guaranteed pension for life with the option of a spouse's or dependant's pension thereafter. These are valuable benefits. What is your client s view on the importance of a guaranteed level of income? What is your client's view on the importance of being able to vary the payment of income? Retirement What is your client's anticipated or planned retirement age? Does your client intend to fully retire or continue to work part-time? Other sources of income Are there any additional pension arrangements/plans? Does your client have any other savings plans or sources of income? Please record details (including any inheritances, dividend income, rental income, savings income etc): Lump sum/cash Does your client need access to cash before their normal retirement date? Page 4 of 8

5 Part 2 Client's aims and objectives continued Is your client looking to take cash in stages or flexibly? Income requirements Estimated core expenditure (e.g mortgage/bills/council tax/transport etc) monthly/p.a. Estimated discretionary expenditure (e.g. holidays, leisure activities) Other expenditure Total estimated expenditure monthly/p.a. monthly/p.a. monthly/p.a. Debts Audit-full details such as APR, remaining term, payments, repayment penalties. On clearing debt is further credit likely to be taken? Tax implications discussed (and the need to manage income flexibly in line with tax rates)? Does your client want a guaranteed income? Does your client want inflation protection? Ill-Health Does your client have any ill-health requirements driving the need for Tax Free Cash or increased income? Please record details below (including any IHT implications): Page 5 of 8

6 Part 2 Client's aims and objectives continued Death Benefits Client Considerations Client specific factors (Personal/Family) What is your client's current relationship status? Does your client have any qualifying dependants? Please record details below (including when the dependency ends): Does your client have any other non-dependants they may wish to leave money to? Does your client's spouse prefer a capital sum rather than a guaranteed scheme spouse's pension? Please record any other below: Does your client wish to explore inter-generational planning? Have you discussed your client's tax position (on death) pre and post age 75? Are there any other plans in place to assist with your client's requirements on death? Page 6 of 8

7 Part 2 Client's aims and objectives continued Risk Considerations On transfer, the investment risk is carried by the individual and the guarantees implicit in the occupational scheme are lost for good. How does your client feel about this? Attitude to risk What is your client's attitude to risk? Capacity for loss What is your client's capacity for loss? Part 3 Sense check Client's defined benefit scheme details versus client's aims and objectives Please detail any planning opportunities that were discussed to meet the client's aims and objectives. Does your client scheme benefits meet their aspirations? (i.e income, death benefits, dependant's requirements, flexibility) please record details below: Have you run cash-flow modelling analysis or retirement projections for your client? Lifetime Allowance Have any Lifetime Allowances issues been considered and discussed with your client? Page 7 of 8

8 Part 3 Sense check Client's defined benefit scheme details versus Client's aims and objectives continued Next steps and summary You should only consider a transfer if you can clearly demonstrate that this is in the client's best interests. Please summarise below your conclusions regarding your client's retirement aims and objective provisions. If any further investigation or formal analysis is required, please record any details below: Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC Authorised and regulated by the Financial Conduct Authority. RACS /2017 Page 8 of 8