AF7 Study Plan (March sitting)

Learning Outcomes covered in this chapter:

LO1: Understand the fundamental aspects of the pension transfer process

1.1 Explain the key regulatory rules, requirements, and definitions relevant to pension transfers, opt outs, and conversions as set out by: the Financial Conduct Authority including relevant sections of the Conduct of Business Sourcebook; the Pensions Regulator; Legislation.

1.2 Understand the roles and responsibilities of the main parties involved in the pension transfer process; including but not limited to trustees, administrator, an actuary; Pension transfer specialist; Money and Pensions Service.

1.3 Explain the key elements of the pension transfer advice process including but not limited to: triage process and advice boundaries; Key stages of the advice process; Two adviser firms are working together; Know your client requirements; The process and assumptions used in the calculation of the cash equivalent transfer value (CETV); The process and assumptions used in the calculation of the Transfer Value Comparator (TVC); Appropriate pension transfer analysis (APTA); Requirements when providing a personal recommendation.

Learning Outcomes covered in this chapter:

LO2: Understand the key issues that should be taken into account when advising on the suitability or otherwise of transferring pension benefits:

2.1 Demonstrate how the features of defined benefit (DB) schemes may impact a pension transfer recommendation including but not limited to: security of pension benefits; guaranteed minimum pension (GMP); Revaluation and escalation; Death and ill health benefits; Commutation and pension increase exchange; Level of pension commencement lump sum (PCLS) available; Protected retirement ages; Transfer club.

2.5 Understand how the following may impact the suitability or otherwise of a pension transfer recommendation: lifetime allowance and transitional protections; Funding and solvency including employer covenant and recovery plans; Pension Protection Fund (PPF); Financial Services Compensation Scheme (FSCS).

Learning Outcomes covered in this chapter:

LO2: Understand the key issues that should be taken into account when advising on the suitability or otherwise of transferring pension benefits:

2.3 Demonstrate how features of the receiving scheme may impact a pension transfer recommendation, including but not limited to; Level of PCLS available; Flexi-access drawdown, Uncrystallised funds pension lump sum; Annuity options including enhanced and impaired; Phasing benefits; Death benefits; Charges; investment options.

2.4 Understand the importance of the following factors when advising on a potential pension transfer: investment risk, Longevity risk and sustainability; Nomination of beneficiaries and bypass trusts; Matching income and investment strategies; Safe withdrawal rate; Sequencing risk; Economic risks such as inflation and changes in interest rates; Annuity risk; Taxation

Learning Outcomes covered in this chapter:

LO2: Understand the key issues that should be taken into account when advising on the suitability or otherwise of transferring pension benefits:

2.4 Understand the importance of the following factors when advising on a potential pension transfer: investment risk, Longevity risk and sustainability; Nomination of beneficiaries and bypass trusts; Matching income and investment strategies; Safe withdrawal rate; Sequencing risk; Economic risks such as inflation and changes in interest rates; Annuity risk; Taxation

2.5 Understand how the following may impact the suitability of a pension transfer recommendation: lifetime allowance and transitional protections; Funding and solvency including employer covenant and recovery plans; Pension Protection Fund (PPF); Financial Services Compensation Scheme (FSCS).

LO3: Advise on pension transfers in a range of client specific circumstances and scenarios

3.1 Gather sufficient information to satisfy the ‘know your client’ requirements: reconciling client objectives and needs; Assets and liabilities; Hard and soft facts; Attitude to, and understanding of, transfer and investment risk, capacity for loss; previous investment experience.

3.2 Analyse the impact the following have in determining the suitability or otherwise of a pension transfer: health and longevity; Trade-offs between retirement needs and other factors; Wealth preservation and legacy planning; Taxation; Debt; Serious ill-health; Partial transfers; Cash flow modelling and stress testing.

Learning Outcomes covered in this chapter:

LO1: Understand the fundamental aspects of the pension transfer process

1.3 Explain the key elements of the pension transfer advice process including but not limited to: Triage process and advice boundaries; Key stages of the advice process; Two adviser firms working together; Know your client requirements; The process and assumptions used in the calculation of the cash equivalent transfer value (CETV); The process and assumptions used in the calculation of the transfer value comparator (TVC); Appropriate pension transfer analysis (APTA); Requirements when providing a personal recommendation.

This chapter also covers some areas found in learning outcome 2, specifically syllabus points 2.1, 2.2, 2.3 and 2.4 and learning outcome 3 syllabus point 3.1. Rather than list all of these learning outcomes and syllabus points, we decided to just give you a bit of a street instead.

Learning Outcomes covered in this chapter:

LO3: Advise on pension transfers in a range of client specific circumstances and scenarios

3.2 Analyse the suitability or otherwise of pension transfers in a range of scenarios: Defined benefit to Defined contribution; Other plans with safeguarded benefits to defined contribution; Transfer for future benefit crystallisation; Transfer for immediate benefit crystallisation 

3.3 Analyse the impact the following have in determining the suitability or otherwise of a pension transfer: Health and longevity; Trade-offs between retirement needs and other factors; Wealth preservation and legacy planning; Taxation; Debt; Serious ill-health; Partial transfers; Cash flow modelling and stress testing

3.4 Alternative solutions to meet client objectives, including but not limited to: Life assurance; Short-term borrowing; The use of other assets.