Introduction and Background
The Taxation of Pensions Act 2014 designed to allow flexible access to pension funds, commenced 6/04/15, meaning that a male age 65 with Defined Benefit (DB) and Occupational Money Purchase (OMP) pension scheme, could transfer into flexible-access drawdown (FAD) allowing unlimited withdrawals or purchase of a lifetime flexible annuity with all/part of transfer value.
However, there are a number of factors involved, ensuring that client outcome is the right for him and his family when considering transferring from his current DB to FAD.
This paper will critically evaluate key factors a 65-year-old male may consider with his financial adviser’s guidance, when considering transferring DB and DC OPS benefits …show more content…
Critical Yield (CY) used in establishing a Transfer Value Analysis Report (TVAS)
Our client and his adviser needs to be aware of the CY when considering a transfer from DB to FAD, to help make the correct decision and chose the most suitable outcome. The FCA have legislated that producing a TVAS is required when looking at transferring from DB.
CY is not utilised less than a year to NRD as the calculation is erroneous . Illustrations from ceding scheme and FAD are compared to provide a comparison
In conclusion CY is an important factor for our male age 65 and whilst not the only measure when making decisions, it can make transfers acceptable or non-acceptable. If disregarded then there is a potential for an incorrect outcome for our male . However in my opinion ideally CY value needs to be combined with information on gilt yields, ATR, health and annuity rates and investment options to build a holistic view this will provide full information to our male and will aid his …show more content…
The fund is kept within an IHT protected pension trust and can be passed down using a spousal bypass trust (SBT) can be used with personal pension plans to protect pension death benefits from inheritance tax. It is a discretionary trust and is governed by exactly the same principles and rules of operation that discretionary will trusts work by. At age 75, The LTA charge will apply in the normal way i.e. 55% if the excess over the LTA is taken as a lump sum or 25% if taken as income. A second LTA test applies to any growth in the drawdown fund at annuity purchase or if the male age 75 is still in drawdown at age 75
When a client first moves into drawdown a BCE arises. A second test against the LTA also occurs when individuals use the funds to buy an annuity or reach age 75, whichever is sooner. The amounts crystallised are the annuity purchase price or value of the remaining drawdown fund, respectively. However, the amount crystallised at the second BCE is reduced by the amount originally designated to
The Taxation of Pensions Act 2014 designed to allow flexible access to pension funds, commenced 6/04/15, meaning that a male age 65 with Defined Benefit (DB) and Occupational Money Purchase (OMP) pension scheme, could transfer into flexible-access drawdown (FAD) allowing unlimited withdrawals or purchase of a lifetime flexible annuity with all/part of transfer value.
However, there are a number of factors involved, ensuring that client outcome is the right for him and his family when considering transferring from his current DB to FAD.
This paper will critically evaluate key factors a 65-year-old male may consider with his financial adviser’s guidance, when considering transferring DB and DC OPS benefits …show more content…
Critical Yield (CY) used in establishing a Transfer Value Analysis Report (TVAS)
Our client and his adviser needs to be aware of the CY when considering a transfer from DB to FAD, to help make the correct decision and chose the most suitable outcome. The FCA have legislated that producing a TVAS is required when looking at transferring from DB.
CY is not utilised less than a year to NRD as the calculation is erroneous . Illustrations from ceding scheme and FAD are compared to provide a comparison
In conclusion CY is an important factor for our male age 65 and whilst not the only measure when making decisions, it can make transfers acceptable or non-acceptable. If disregarded then there is a potential for an incorrect outcome for our male . However in my opinion ideally CY value needs to be combined with information on gilt yields, ATR, health and annuity rates and investment options to build a holistic view this will provide full information to our male and will aid his …show more content…
The fund is kept within an IHT protected pension trust and can be passed down using a spousal bypass trust (SBT) can be used with personal pension plans to protect pension death benefits from inheritance tax. It is a discretionary trust and is governed by exactly the same principles and rules of operation that discretionary will trusts work by. At age 75, The LTA charge will apply in the normal way i.e. 55% if the excess over the LTA is taken as a lump sum or 25% if taken as income. A second LTA test applies to any growth in the drawdown fund at annuity purchase or if the male age 75 is still in drawdown at age 75
When a client first moves into drawdown a BCE arises. A second test against the LTA also occurs when individuals use the funds to buy an annuity or reach age 75, whichever is sooner. The amounts crystallised are the annuity purchase price or value of the remaining drawdown fund, respectively. However, the amount crystallised at the second BCE is reduced by the amount originally designated to