Step-by-Step - How to enter a final salary pension

1. Select Pensions > Final Salary in the left navigation.

2. People: Start by selecting the owner of the pension in the People panel, located on the right side of the screen.

3. Name: Enter a name for the pension. The name you enter must be unique within the plan. 

4. Status: Select the category that best describes the final salary.

  • Active
  • Deferred
  • In Payment

The status will determine the precise options remaining to be entered, but each category invites you to input survivor's benefits and each presents relevant escalation options, for which one can select from a variety of fixed % options or pre-specified Preferences settings such as LPI, CPI, RPI and a variety of fixed % options.

Before going any further, a question that is often asked with reference to Active and Deferred schemes, relates to the fields labelled Normal Retirement Age (NRA) and Actuarial Reduction. As noted elsewhere, below, the software assumes (by default) that benefits will commence from the individual's Retirement event, not from the scheme's NRA. As such, these fields are only of genuine relevance for an individual who may be taking early retirement and, thereby, is at risk of incurring an actuarial reduction on benefits (which, of course, the software will apply, as appropriate).

  • Active

When inputting an 'Active' final salary scheme, one is invited to enter the years of service accrued, to date, the 'Accrual Rate' and the 'Salary Scheme'. Ordinarily, one will want to link the final salary scheme to the individual's employment - given the above information, this will give the software the ability to calculate the appropriate level of benefits.

 

If one does not link the scheme to an individual's employment, it will be necessary to input the Pensionable Salary - this should be entered as a 'future value' (i.e. it will not be inflated). This option may be useful in instances where an individual's pensionable salary differs from the salary that they are, in fact, receiving. If one is using this option, however, (in the event that the scheme is contributory) please be aware that employee contributions, ordinarily entered under Advanced Settings (see below) will not be pulled-through.

  • Deferred/In Payment

In the case of Deferred benefits and those already In Payment the level/value of benefits is already a known quantity, i.e. benefits are not contingent upon future service. The amount of benefits that are to be paid, therefore, will need to be entered manually.

Advanced Settings

Additional settings and options are available under Advanced Settings. We roll these special settings “beneath the fold” so as not to make entering a money purchase appear too daunting. Everything you must consider is above, but these advanced settings are available whenever you might need to set the software to handle things in a special way and trust us, at some point you will.

  1. Lump Sum Options
  2. Death-In-Service/Widow's Pension
  3. Death-In-Deferment
  4. Employee Contributions

 Taking each of these, in turn:

  • Lump Sum Options (applicable to Active and Deferred benefits only)

Assuming that the client is entitled to tax-free cash, their entitlement needs to be entered either as a given - 'Declared Amount' - as a multiple of pension income, or as a commuted lump sum. For more details on the 'Commutation' option... Read more >>

  • Death-In-Service/Widow's Pension (applicable to Active schemes only)

For more details on how to enter death-in-service benefits and/or spouse's pension benefits accruing from a final salary scheme... Read more >> (Specifically, 'Option 2').

  •  Death-In-Deferment (applicable to Active and Deferred benefits only)

With regards to the death benefits that are applicable during the period after the individual has ceased employment, but before they have commenced drawing benefits from the scheme, these can be entered here.

  • Employee Contributions (applicable to Active schemes only)

Contributions to a contributory final salary scheme can be entered here, so long as the scheme has been linked to the individual's employment (see above). Also, read how tax relief is granted on contributions to final salary schemes. Read more >> 

Commencement/Deferment of Benefits

As is the case with Money Purchase schemes, the software assumes (by default) that final salary benefits will commence payment at an individual's Retirement event - where this is the case, no further action is needed. Where this is not the case, because benefits are to be 'deferred', go to the Time panel located on the right side of the screen. For defined benefit schemes, a selection on this panel will be used to indicate the point at which benefits are to commence payment.

In the case of deferment, therefore, this raises the question as to whether 'Retirement' is best treated as the point at which an individual ceases employment or the point at which they commence drawing pension benefits - either way, one will need to create a separate event for either the cessation of employment or for the commencement of pension benefits.

Select the Event tab.

If you don't already have the appropriate events on the timeline, new ones can be easily added by clicking the New Event button, located in the bottom-right corner of the Time panel, Event tab.

Note that the new event can be positioned on the timeline based on either the future year or age of the owner; once created, events can be repositioned, renamed, deleted (in the Time screen). Alternatively, of course, new events can be simply clicked-and-dragged onto the Timeline (in the Time screen, itself).

Now, select the event at which benefits are to commence (as shown below) and no further action is needed.

 

Save Your Work!

And that completes all that is required to enter final salary benefits into Voyant. You may now click the Add button to save the scheme into the plan. 

Your client’s final salary benefits now appear in the ledger, located on the right side of the screen. To view or edit the pension, select it first in the ledger. To move on to another entry after viewing details, click Clear.

Notice that a link icon is shown next to the pension in the ledger, indicating that there are items in the plan linked directly to the final salary.

You may click this icon to view what this linked item is (probably, the client's employment).

This pop-up label is an active link that can be clicked to jump directly to details about the client's employment.