10 - Indirect Investments (A & B) Flashcards
A Tax wrappers B Registered pension schemes
Which type of products can you “wrap” with a tax wrapper?
Pension and ISA
How do you know if a pension scheme is registered?
It will have a PTSR
Although registered pension schemes benefit most people, what are the 2 main disadvantages?
- Restriction on investment input
- Restriction on access
How much can the employed/self-employed currently invest into a registered pension scheme per year and to what age?
£60,000 annual allowance or;
Current qualifying earnings 100%.
Max. age 75.
How much can the unemployed invest into a registered pension scheme each year, to still gain basic tax relief?
£3,600
What happens to your annual allowance if you flexibly access your pension benefits from age 55?
Annual allowance is removed and replaced with money purchase annual allowance (MPAA)
What is the current MPAA amount?
£10,000
What is the purpose of the MPAA?
Created to stop people from trying to avoid tax on current earnings or gain tax relief twice, by withdrawing pension savings and then paying them straight back in again.
How does the tapered annual allowance (TPAA) for pensions work and who does it apply to?
For qualifying earnings £260,000 +, the £60,000 is reduced by £1 for every £2 over £260,000, to a minimum of £10,000.
What is the TPAA formula?
(Annual Allowance – ((Earnings - £260,000) / 2)
What is the tapered annual allowance for someone with earnings of £360,000?
£10,000
MPAA affects one one type of pension, which is?
Money purchase (DC)
Triggering MPAA can be avoided when accessing your pension, in which 3 ways?
- Cashing in small pots
- PCLS
- Annuity
How does the small pots exemption work?
Cash in up to three small pots of up to £10,000 each, without affecting annual allowance
How much unused annual allowance can you carry forward?
Previous 3 tax years but only at that tax years rate (for example, £40,000 AA 2022/23 tax year)
If you have carry forward available, why might you not be able to use it?
Triggered MPAA
What was the lifetime allowance and why was it abolished?
£1,073,100
To encourage 50-64 year olds back to work, to increase employment in the labour market
What’s the largest PCLS you can take?
£268,275 (25% x old lifetime allowance), unless protected
At what age can you take benefits from your pension?
55 today, 57 in 2028
Tax-free benefits are available on pensions where the owner died under which age, and under what conditions?
75, if taken out within 2 years or arranged to be taken via drawdown
What are the 3 ways in which you can access your pension?
- PCLS
- UFPLS
- Annuity
What is capped drawdown and who reviews the caps, and how often?
Where your annual withdrawal limit is capped, amount reviewed by GAD every 3 years.
GAD is the Government Actuarial Department
What are the 3 main benefits of converting from capped to flexi-access drawdown?
- No capped limit
- No need to pay for GAD reviews
- No charges for taking one off payments
Once switched from capped to flexi-access drawdown, can it be switched back?
No
Borrowing to fund property purchase or any other investment cannot exceed how much of the net value of the fund?
50%
