Pension funding options

At the end of this unit, candidates should be able to demonstrate an understanding of the:
• main tax and legal frameworks that govern the accumulation phase of building up retirement benefits
under registered pension schemes;
• features of defined contribution and defined benefit pensions;
• choices faced by early leavers and use of transfer value analysis;
• State retirement benefits available, including contracting out of the State Second Pension.

Summary of learning outcomes

1. Understand the HM Revenue and Customs (HMRC) tax regime for pensions with particular reference to
the accumulation of retirement funds;
2. Understand the State retirement benefits available, including contracting out of the State Second Pension;
3. Understand the legal framework for pensions;
4. Understand the features of defined contribution pension schemes;
5. Understand the features of defined benefit pension schemes;
6. Understand the choices faced by early leavers and the use of transfer value analysis;
7. Understand key issues in pension accumulation.

Important notes
• This syllabus will be examined in the October 2011 and April 2012 sessions. Candidates will be
examined on the basis of English law and practice in the tax year 2011/2012 unless otherwise stated.
• The general rule is that the exams are based on the English legislative position three months before the
date of the exams.
• Candidates should refer to the CII update website www.cii.co.uk/updates for the latest information on
changes to law and practice and when they will be examined.

2011/2012 J04
© The Chartered Insurance Institute 2011
 1. Understand the HM Revenue and
Customs (HMRC) tax regime for
pensions with particular reference to
the accumulation of retirement funds
1.1 Criteria for scheme registration;
1.2 Eligibility for tax relief on contributions to a
registered pension scheme;
1.3 Lifetime and annual allowances, including
transitional reliefs and valuation factors;
1.4 Pension commencement Lump sum limits;
1.5 Normal minimum pension age and concessions;
1.6 Benefit crystallisation events including valuation;
1.7 Lifetime allowance charge and annual allowance
charge;
1.8 Benefits payable on death before crystallisation;
1.9 The tax treatment of pension funds and benefits
including sanctions.
2. Understand the State retirement
benefits available, including
contracting out of the State Second
Pension
2.1 Basic State pension – eligibility through National
Insurance contributions and credits, payment age
and deferral options;
2.2 State Pension Age: equalisation of male and female
ages, and subsequent increases;
2.3 Other State pension benefits – Graduated Pension
and State Earnings Related Pension in outline, State
Second Pension (S2P), and Pension Credit;
2.4 Contracting-out including the impact on National
Insurance contributions and forthcoming changes;
3. Understand the legal framework for
pensions
3.1 Department for Work and Pensions legislation:
the Pensions Acts including member nominated
trustees, contribution schedules, disclosure,
employer access, reporting requirements,
statements of investment principles;
3.2 Pension Protection Fund and Financial Assistance
Scheme;
3.3 The role of the Pensions Regulator, Financial
Ombudsman, Pensions Ombudsman and Pensions
Advisory Service;
3.4 Trust law including the distinction between trust
and contract based pension schemes;
3.5 The duties and responsibilities of trustees,
actuaries, administrators and others involved with
the operation of pension schemes;
3.6 The impact of EU law, including the Pensions
Directive and Age Discrimination Directives;
2011/2012
© The Chartered Insurance Institute 2011
3.7 Financial Services & Markets Act (2000) and the
role of the Financial Services Authority in regulating
pension advice.
4. Understand the features of defined
contribution pension arrangements
4.1 The levels and structures for contributions,
including workplace pension arrangements;
4.2 Investment strategies including life-styling and
target date funds;
4.3 Self investment options and restrictions;
4.4 The structure of benefits available on death,
ill health and retirement;
4.5 Statutory money purchase illustrations.
5. Understand the features of defined
benefit pension schemes
5.1 The structure of benefits available on death,
ill health and retirement;
5.2 Topping up defined benefit schemes – employer
contributions and members’ voluntary
contributions;
5.3 Variations on defined benefit schemes – final salary,
defined cash, career average, hybrid and integrated
schemes;
5.4 The main methods of calculating a scheme’s
liabilities and their purposes;
5.5 Scheme funding including trustees’ and employers
responsibilities and options if scheme in deficit.
6. Understand the choices faced by early
leavers and transfer value analysis
6.1 Rights and options of early leavers;
6.2 Revaluation of deferred benefits;
6.3 Steps involved in calculating a cash equivalent
transfer value, including the relevance of pension
scheme solvency;
6.4 Transfer value analysis systems; the assumptions
made in arriving at the critical yield and
their interpretation in the light of a client’s
circumstances;
6.5 Asset allocation in order to meet the critical yield;
6.6 Permitted transfers to and from overseas pension
arrangements;
6.7 The scope and operation of the transfer club;
6.8 Regulatory guidance for advising on transfers from
both defined benefit and defined contribution
arrangements.
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 7 Understand key issues in pension
accumulation
7.1 Assessing retirement income needs and the factors
that will determine appropriate contribution levels;
7.2 Risks and potential returns from the main asset
classes;
7.3 Salary sacrifice in workplace pensions;
7.4 Comparison between the different types of defined
contribution pension arrangements;
7.5 Comparison between pension and non-pension
products as a means of building up retirement
income;
7.6 Pension funding and the impact on the Pension
Credit;
7.7 Pensions and divorce;
7.8 National Employment Savings Trust.
2011/2012
© The Chartered Insurance Institute 2011
Reading list
The following list provides details of various publications
which may assist with your studies. Periodicals and
publication swill be of value in ensuring candidates keep
up to date with developments and in providing a wider
coverage of syllabus topics. Any reference materials cited
are authoritative, detailed works which should be used
selectively as and when required.
Note: The examination will test the syllabus alone.
The reading list is provided for guidance only and is not in
itself the subject of the examination.
CII/Personal Finance Society members can borrow most
of the additional study materials below from Knowledge
Services. CII study texts can be consulted from within the
library. For further information on the lending service,
please go to www.knowledge.cii.co.uk/library/services.
Pensions and retirement planning. Edited by Rob Gaines.
London: Taxbriefs. Annual.
Pension funding options. London: CII. Study text J04.
Stakeholder pensions schemes. Roger Self. London:
CII Knowledge Services. Updated annually. Available online
via www.knowledge.cii.co.uk (CII/Personal Finance Society
members only).
State retirement pensions. Roger Self. London:
CII Knowledge Services. Updated annually. Available online
via www.knowledge.cii.co.uk (CII/Personal Finance Society
members only).
The tax treatment of pension schemes. Roger Self. London:
CII Knowledge Services. Updated annually. Available online
via www.knowledge.cii.co.uk (CII/Personal Finance Society
members only).
Reference materials
Croner’s pensions compliance service. Kingston upon
Thames: Croner. CCH. Looseleaf, updated.
Butterworths pensions legislation service. London:
LexisNexis UK. Looseleaf, updated.
Pensions: law and practice with precedents. London:
Sweet & Maxwell. Looseleaf, updated.
Pensions law handbook. Pensions Department of Nabarro
Nathanson. Haywards Heath. West Sussex: Tottel. Annual.
Pensions pocket book. London: Economic and Financial
Publishing Ltd in association with Hewitt Associates.
Annual.
Registered pension schemes manual. London: HMRC.
Available online at
www.hmrc.gov.uk/manuals/rpsmmanual.
Sweet & Maxwell’s Law of pension schemes. Nigel
Inglis‑Jones. London: Sweet & Maxwell. Looseleaf,
updated.
The Pension trustee’s Handbook: the definitive guide to the
trustee’s role and obligations. Robin Ellison. Thorogood,
2006.
Tolley’s guide to pensions tax simplification. Alec Ure.
London: LexisNexis Tolley, 2006.
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 Periodicals
Financial Adviser. London: FT Finance. Weekly.
Also available online at www.ftadviser.com.
Financial Solutions. London: Personal Finance
Society. Six issues a year. Also available online via
www.knowledge.cii.co.uk(CII/Personal Finance Society
members only).
Money Management. London: FT Finance. Monthly.
Money Marketing. London: Centaur Communications.
Weekly. Also available online at
www.moneymarketing.co.uk.
Pensions Age. London: Perspective. Monthly.
Pensions Management. London: FT Finance. Monthly.
Pensions Week. London: FT Finance. Weekly.
Professional Pensions. London: Incisive Media. Weekly.
Also available online at www.professionalpensions.com.
Further articles and technical bulletins are available at
www.knowledge.cii.co.uk (CII and Personal Finance Society
members only).

Examination guides
Guides are produced for each sitting of written answer
examinations. These include the exam questions,
examiners’ comments on candidates’ performance and key
points for inclusion in answers. You are strongly advised
to study guides for the last two sittings. Please visit
www.cii.co.uk to buy online or contact CII Customer Service
for further information on +44 (0)20 8989 8464.
Older examination guides are available (for members only)
via www.knowledge.cii.co.uk.

Exam technique/study skills

There are many modestly priced guides available in
bookshops. You should choose one which suits your
requirements.

2011/2012 4 of 4
© The Chartered Insurance Institute 2011