For the purposes of the CPC examinations, learners will need to take into account a variety of special circumstances and show how they affect the benefits payable:
Although retained benefits (i.e. additional pension rights held outside of the scheme) are not specifically tested in the CPC examinations, they may have an impact on a member's available 'Lump Sum & Death Benefit Allowance' and 'Lump Sum Allowance'.
Details of special circumstances should always be included when an associated letter is required to be written.
1. How are split rates of accrual handled?
Typically, changes in accrual rate will occur in a salary related scheme whereby members have either changed their category of membership to one that accrues pension at a different rate or because the scheme rules have been amended to provide a higher / lower accrual rate.
Split rates of accrual will not be applicable for case studies relating to Transfers.
2. How is part-time service handled?
Where a member has worked (or is working) on a part-time basis, pensionable service for a salary related scheme will need to be adjusted to reflect the reduced hours that the member has worked (or is working). For a money purchase scheme, working reduced hours will mean contributions are based on a lower salary (i.e. actual salary rather than the full-time equivalent salary).
Part-time service will not be applicable for case studies relating to Transfers.
3. How are transferred-in benefits handled?
Benefits transferred in to a salary related scheme may take the form of either a fixed additional pension (often revalued to normal pension date) or a number of added years/months (or days) of pensionable service. For a money purchase scheme, the transfer in will normally be in the form of a single payment to be added to the member`s individual policy account.
Transferred-in benefits will not be applicable for case studies relating to Transfers.
4. How are AVCs handled?
Schemes are obliged to keep Additional Voluntary Contributions (AVCs) separate from the main fund. For salary related schemes and money purchase schemes, the actual value of the AVCs are generally used to provide additional benefits. However, for some salary related schemes it is possible to pay AVCs to provide added years of service.
From 6 April 2006 it has not been compulsory for occupational pension schemes to offer the facility for members to pay AVCs.
5. How are augmentations handled?
An augmentation is an enhancement to a member`s benefits over and above those that would normally be provided under the scheme rules.
If an augmentation has been granted prior to a member leaving service, it is important that the augmentation has been properly authorised and documented by the trustees.
Augmentations will not be applicable for case studies relating to Transfers.
6. How are retained benefits handled?
Retained benefits are pension rights derived from a member's participation in other registered pension schemes.
Retained benefits must be considered when checking against a member's remaining 'Lump Sum & Death Benefit Allowance' and 'Lump Sum Allowance'.
Retained benefits will not appear in case studies relating to Transfers.
