AFA 2 Flashcards
Partnership protection?
Automatic Accrual: Deceased’s partner compensated via life policy.
Buy & Sell: Partner’s executors legally obliged to sell, partners buy using life policy proceeds.
Cross Option: Both parties have option to buy/sell.
In general, benefits available to?
Those with savings <£16,000, reduced if >£6000.
Jobseekers allowance?
‘New Style’ dependent on having paid sufficient C1 NICs. Paid at fixed rate irrespective of savings/partners earnings.
SMP eligibility?
Payable for?
Worked for 26wks, including 15th (qualifying wk) pre-baby.
39 wks
6wks at 90%, lower standard rate thereafter
Maternity allowance for self employed?
Maternity Allowance.
Child benefit?
Income tax charge at £1 for every £100 over £50k. Thereby, earning >£60k, child benefit paid is negated.
What is Working Tax Credit and Child Tax Credit?
WTC: ‘Top-up’ for low earners.
CTC: Those with children who get WTC.
Statutory Sick Pay when?
Off for 4 or more days. Paid up to max of 28 wks.
New style ESA for? Process?
Incapacity to work owing to illness/disability.
Ax then main phase.
Attendance allowance?
Tax-free benefit for those over state pension age.
Personal independence Payment (PIP) for?
Help with:
- ‘Daily Living’
- ‘Mobility’
Universal credit replaces?
Claims made on?
ESA, JSA, WTC, CTC, Income support.
Household basis.
Bereavement support payment?
£2500/3500 lump sum + 18mthly £100/350
SERPS? S2P?
They allow?
SERPS: State Earnings Related Pension Scheme.
S2P: State Second Pension.
SMI is?
Support for Mortgage Interest, loan to people in receipt of benefits, towards mortgage payments.
Benefits cap outside London? Inside London?
£258 single/£385 family
££296 single/£442 family
Main types of life assurance?
To be qualifying? Meaning?
Whole of Life
Term Assurance
Minimum term of 10 years. No additional tax (on top of life office).
Flexible whole of life policies are?
Universal whole of life policies?
Unit linked whole of life policies.
Include other benefits e.g. Income Protection/CIC.
Types of whole of life policies?
Non-Profit
With-Profit
Unit-Linked
Unitised With-Profit
Low-Cost
FIB?
Level decreasing term assurance providing income, instead of lump sum (Unlike Term Assurance).
Gift inter vivos policy?
Term assurance to cover IHT liability.
Increasing term assurance is?
Increasing sum assured through time, with increasing premiums, to negate inflation.
Split-Benefit/Carve Out Trust?
On discretionary basis.
Life assurance component within trust, CIC outside.
ASU?
Accident, Sickness, Unemployment Insurance. Annually renewable/reviewable/revisable.
PPI?
Payment Protection insurance: protect repayments to service a loan or debt (or mortgage).
Tax conditions on CIC/IPI/ASU/PPI?
Tax-Free
PMI vs Hospital Cash Schemes?
PMI: Medical Expenses
HCS: Costs of hospitalisation.
Life assurance policy mechanics? Benefit?
Settlor (Maker) often a trustee.
Out of IHT estate.
KFD vs KFI for protection plan?
KFD: Generic features
KFI: Customer specific
Trust types?
Statutory/MWPA: protect trust assets against bankruptcy
Absolute/Bare: Inflexible
Flexible
Discretionary: Flexible, by class
- A&M: E.g. provide for children, until 18
IIP: Parent provide for other, preserve capital for child
Will Trust
What is assignment?
Transferring policy to another owner (Assignee) via deed of assignment to be able to pay off debts.
How can life policy proceeds be paid out?
On death
Maturity
Surrender
Part-Surrender
Life policy tax?
Qualifying? Contribution limit?
Non-Qualifying?
Life Office pays CT on income, CGT on profits –> BR Liability therefore paid.
Qualifying: No further tax. £3600/yr.
Non Qualifying: Gain taxed, on chargeable event (Death claims: Surrender value pre-death used).
Top slicing relief used when?
How to calculate top slice?
Chargeable gain makes them HR/AR taxpayer.
Total gain/Yrs of Policy
Top Slice + Income –> 20% of part in HR band, then multiplied by policy years.
Withdrawal from life policy?
Up to 5% without resultant IT liability.
Tax treatment of:
- Contributions to pension term assurance?
- Lump Sum Death benefits from pension?
- No tax relief.
- Tax free if <75.
Offshore life policy taxation?
Not subject to UK life fund taxation. Taxed as per country, or, once proceeds payable as per IT rate.
Taxation of life policies for business protection?
Premiums are tax-deductible.
Tax on traded endowment policies?
No tax for seller.
Can be chargeable event (If <10yrs).
Viatical Settlement?
Intermediary buys a life policy from a terminally ill policyholder.
CIC tax?
Group CIC?
No tax relief on premiums. Tax-free payout.
Allowable business expense.
IPI tax?
Group IPI?
No tax relief, so not subject to tax.
Tax-deductible expense,
ASU/MPPI tax?
No tax relief.
Income payments tax-free.
PMI Tax?
Employer contributions?
Premiums subject to insurance premium tax, benefits paid tax free.
Allowable deduction against CT
AFA 2 - Top 9 + 10
Pensions Regulator?
Pension Protection fund?
Financial Assistance Scheme?
Promote good pensions.
Recover pension money from insolvent firms.
To help those DB schemes not covered by PPF.
Pensions and divorce?
Offsetting: Added to total assets
Earmarking: % to partner when crystallised
Splitting: Split
Pensions in bankruptcy?
Excluded.
Aim of SERPS? S2P? If leaving?
- Boost state pension by 25%
- Boost low/Mod earners’ pension
- ‘Contracted out’
Types of Pension Credit?
- Guarantee Credit
- Savings Credit
Pension changes 2024?
LTA scrapped.
£268k PCLS limit.
Annual pension allowance to £60k.
How are pensions paid?
Personal: Net of BR tax, then reclaimed later.
Occupational: ‘Net pay agreement’
What is A day?
If previously >25%
06/04/06 –> Pension Simplification.
Can Primary/Enhance protect LS.
What is QROPS?
Qualifying recognised overseas pension scheme
Drawdown Pension? Types?
Funds remain invested.
- Flexi-Access
- Short Term Annuities
- Uncrystallised Funds Pension LS
What is MPAA?
Money Purchase Annual Allowance: Only contribute £10,000 to pension once triggered.
SIPP?
Self Invested Personal Pension.
