Brand set 1 Flashcards
Which of the following count as “pensionable remuneration as employee earnings” for DB accrual and DC Annual Allowance calculations:
Basic Salary
Bonuses
Dividends
Basic salary and Bonuses count
Dividends do not count
How does a self-employed individual obtain higher rate tax relief on a contribution to a personal pension?
Reducing the income tax paid
on their balancing payment
Self-employed pay 3 instalments of tax. 31st Jan and 31st of July pay 50% each of the previous tax year’s Income Tax liability. Following this a balancing payment is made on the following Jan 31st to account for things such as the above.
If the benefits of a £60k p.a. DB pension fully commences in 2022/23, what is the calculation for LTA purposes?
(£1,200,000 - £1,073,000) * 0.55
2022/23 is post A-Day so the “valuation factor” is 20:1. Therefore it’s 20 times the annual salary. All excess after LTA is charged at 55%.
What is the Pre-A-Day valuation factor?
25:1
If doing another LTA test Post-A-Day then the 25:1 valuation factor remains for all pensions which started paying Pre-A-Day
What date is A-Day?
6th April 2006
How is your LTA reduction calculated for early retirement?
For every year below 55 your LTA is reduced by 2.5%.
What is the tax on the spousal death benefit in the following scenario?
- Pension member died younger than 75 y/o
- Claimed within 2 years
- Taken as lump sum
Income tax free
LTA test
What is the tax on the spousal death benefit in the following scenario?
- Uncrystallised DC pension
- Member died older than 75 y/o
- Claimed within 2 years
- Taken as lump sum
(2)
Full sum taxable at marginal rate
No LTA test
What do annuity rates reliably follow?
Gilt yields (positively correlated)
What is the accrual rate on all DB schemes?
[Trick question] - It is always determined by the scheme’s rules. A common one is:
[3/80] x [salary] x [years of service]
What is a successor?
It is the nominee of a nominee of a DC pension scheme
[With regards to DC death benefits] What is the criteria for a “dependant”?
Any one of the following:
1. Spouse at time of death
2. Child under 23
3. Child who is disabled (determined by scheme administrator)
4. None of the above but scheme administrator still thinks they were financially dependant
What is a Retirement Annuity Contract most similar to?
Personal Pension Plan
What does SSAS stand for? What is it most similar to?
“Small Self-Administered Scheme”
Very similar to a SIPP but even wider range of investments available
What are the key differences between a SIPP (2) and a SSAS (5)?
SIPP is
set up by an individual for themselves
and is contract based.
SSAS is
set up by “the company”
as a group pension
under trust
for the directors and senior members of staff.
Can accommodate additional benefits
DB Scheme member dies age 68 in receipt of benefits. Scheme continues to pay out to spouse.
What is the name of the benefit received by the spouse?
How is it taxed?
“Dependant’s Scheme Pension”
Paid as income
Taxed as their pension income under PAYE
You could think of it as not really changing at all: still income still taxed at marginal rate
What is the difference between a DB Pension and a Scheme Pension?
Scheme pension provides an income in retirement
DB’s are a type of scheme pension which guarantees the amount whilst saving
All DB’s are schemes but not all schemes are DBs
What is the Cii definition of a Scheme Pension?
A pension wherein the administrator uses the balance of the fund
to secure an income for life for the member.
Who’s LTA does a pension term assurance benefit get tested against?
The member
(As a posed to the beneficiaries’ LTAs)
DC Pension member
(under 75) dies
with uncrystallised pot of £1,500,000.
Benefits are paid to dependant as an annuity within 2 years of death.
What is the tax?
25% charge on funds over LTA
Income taxed at marginal rate
Annuities paid to dependant with 2 year conditions satisfied are subject to a 25% tax charge of funds in excess of the LTA.
The annuity payments are then charged at marginal rate.
Who’s LTA does a pension term assurance benefit get tested against?
The member
(As a posed to the beneficiaries’ LTAs)
DC Pension member (under 75) dies with uncrystallised pot of £1,500,000. Benefits are paid to beneficiary as a lump sum within 2 years of death.
What is the tax?
Income tax free
LTA test - 55% on excess over LTA
DC Pension member (under 75) dies with uncrystallised pot of £1,500,000. Benefits are paid as a lump sum to a trust within 2 years of death.
What is the tax?
Trustees pay 45% of the fund’s value in excess of the member’s remaining LTA
Between Fixed & Individual Protection, which protects you in the event that your pension fund falls in value?
Why?
Individual protection
Because you are able to contribute funds to bring the value back up again
Who’s LTA does a pension term assurance benefit get tested against?
The member
(As a posed to the beneficiaries’ LTAs)
Between Fixed & Individual Protection, which protects you in the event that your pension fund rises in value?
Why?
Fixed Protection
Because the LTA was not set at your fund value but at the previous LTA amount so there is still room for growth.
What is the minimum employer contribution for auto enrolment purposes (and since when)?
3% of qualifying earnings
6th April 2019
What was the main purpose of the introduction of the Pension Schemes Act 2017?
(4)
To give The Pensions Regulators
supervisory powers
to authorise and de-authorise
the use of master trusts
What is a master trust?
A regular occupational pension scheme
set up under trust
but is for multiple, unconnected, employers pooling together
offering money purchase benefits
Before a complaint can be sent to the Financial Ombudsman Service, the provider must first investigate and respond to the complaint within how many weeks?
8 weeks
The Pension Ombudsman deals with…
… complaints regarding how occupational and personal pension schemes are run
Who deals with problems regarding the sale and marketing of personal pensions?
The Financial Ombudsman service
Who deals with problems regarding state pensions?
The DWP’s Money and Pensions Service
Who deals with problems regarding how occupational pension schemes are run?
The Pensions Ombudsman
Who deals with the change of trustees on occupational pension schemes?
The Pensions Ombudsman
Who does the Pensions Ombudsman investigate complaints from?
Members and nominees (people who are entitled to something from that pension)
What is an earmarking order?
When a couple is divorced,
if some of the pension of one is included in the settlement
then that amount is “earmarked” for the spouse
The income tax rate on income from an earmarked pension is set at …
The highest marginal rate of the scheme member
Are the Trustees of an occupational pension scheme allowed to recommend employees join the scheme?
Yes
Are the Trustees of an occupational pension scheme allowed to give advice on providers personal pensions?
No