6. Pensions

Question 1

What is the main difference between a personal and occupational pension scheme?

Answer 1

Personal pension contributions are net and need to be grossed up (x 100/80)

Occupational are gross.

Question 2

Max. tax relief for pensions is based on?

Answer 2

The lower of:

• gross pension contributions
• maximum annual amount*
• higher of:
• £3,600
• 100% of relevant earnings: employment and trading income and income from FHA.

Question 3

What is the annual allowance?

What is it effected by?

Answer 3

£40,000 + 3 years prior remaining AA (FIFO basis).

Question 4

What happens when gross pension contributions exceed AA?

Answer 4

Extra charge treated as taxable income at the foot of the comp after savings income. Note as AA charge.

Question 5

When do we reduce a clients AA?

By how much?

Answer 5

When adjusted income exceeds £240,000

Net income X
Occupational contributions X
Employer contributions (either scheme) X
= adjusted income

Reduce by 50% for all income over £240K.

Capped lowest @ £4,000.

Question 6

When can you access your pension fund usually?

How much can you take out as a tax free sum?

Whats your lifetime allowance?

Answer 6

55

25%

£1,073,000