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R04 > Brand Set 2 > Flashcards

Brand Set 2 Flashcards

1
Q

How much can pension advice cost through your employer without counting as a benefit in kind? How often can it be paid?

A

£500

Per tax year

Employer is per tax year

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2
Q

When does SERPS apply?

A

1978-2002

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3
Q

When does S2P apply?

A

2002-2016

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4
Q

When did SGP apply?

A

1961-1978

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5
Q

What is the current state pension name and when did it come into place?

A

Full New State Pension

2016

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6
Q

What are the key requirements for paying pensions advice allowance?

(3)

A

Up to £500

Up to 3 times in your life

Must be paid directly to the adviser

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7
Q

When does your annual allowance start to taper?

A

Adjusted net income

exceeds £240k

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8
Q

Adjusted income calculation:

A

Total taxable income + employer pension contributions { - death benefits received }

(Ignore personal pension contributions)

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9
Q

What is excluded from adjusted income for annual allowance tapering?

A

Personal pension contributions
Death benefits received

(employer pension contributions count)

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10
Q

What is the BTS adjusted income calculation?

A

=
+ Salary
+ employer pension contributions
(Ignore) personal pension contributions
- death benefits

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11
Q

What is the % charge for taking the excess of your pension over the LTA as
1. Income
2. Lump sum

A
  1. 25%
  2. 55%
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12
Q

Which people might be entitled to a higher LTA?

A
  • non-UK residents
  • individuals who transferred benefits from QROPS
  • divorcees

(& then those with Primary or Fixed Protection)

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13
Q

Would a benefit in kind be considered within your total relevant UK earnings

A

Yes

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14
Q

I take my small defined benefit pension as a lump sum

What is the name given to the lump sum?

A

Cash Equivalent Transfer Value

Must be less than £30k - I just didn’t want to put a number on the front - it makes it too recognisable

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15
Q

The Trivial Commutation Rules allow…

(3)

A

Allows individuals with DB schemes

To commute the scheme to a lump sum

Without requirement to purchase an annuity

So presumably if you try to take a lump sum from your DB without this, then you are usually required to purchase an annuity with the money

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16
Q

I take my defined benefit pension as a lump sum
Trivial Commutation Rules apply

How is it taxed?

A

Similar to a DC withdrawal, it’s 25% tax free and 75% is taxed at a marginal rate

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17
Q

I take my defined benefit pension as a lump sum

Which rules must apply for this to be allowed without requiring an annuity purchase?

A

The Trivial Commutation Rules

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18
Q

I want to take an old DB Pension I built up as a lump sum, I’m 79 and it is worth £24k. Assume this does not exceed the LTA. How would this be treated for tax purposes?

A

As if fully crystallising a DC worth the same amount:

£6k (25%) tax free

£18k (75%) taxed at my marginal rate

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19
Q

What are the requirements of the Trivial Commutations Rules?

A
  • Less than £30k pension value
  • Over 55 y/o
  • Not in excess of LTA
  • Not in already in payment
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20
Q

+75
Death benefit
Uncrystallised pension funds
Lump sum paid to family

What is the LTA position?
What is the income tax position?

A

No test on the LTA

Taxed at the marginal rate of the recipient

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21
Q

What is the Primary Protection LTA equation?

A

( A-Day Val / £1.5m ) X £1.8m

£1.8m - the underpinned LTA - will remain like this in the equation until the SLA exceeds it

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22
Q

If HMRC withdraws registration of a registered pension scheme, then what tax is applied and how is it calculated? Who pays this?

A

40% of

the funds held immediately before de-registration

Paid by scheme administrator

“A de-registration income tax charge”

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23
Q

Registered pension fund is transferred to a QROPS.

What charge is levied against excess over the LTA?

A

25%

One way to think about this is that he hasn’t really taken a lump sum but HMRC want some so they charge as if he was taking it as income

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24
Q

To qualify as a QROPS, the scheme must…

Bonus points if you can say what it might not specifically require

(2)

A
  1. Be established in a country which has a double taxation agreement with the UK,
  2. and regulated by the relevant authorities in its own country

Does not need to meet UK regulation

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25
Q

What is the current total minimum level of contribution under auto-enrolment?

A

8%

of qualifying earnings

At least 3% from employer

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26
Q

A Section 143 Valuation is …

A

an actuarial assessment

carried out when the PPF is taking over assets

of an insolvent company’s pension scheme

Determines if the scheme has sufficient assets to pay at least the PPF level of compensation

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27
Q

Once an individual declares bankruptcy and a bankruptcy order is made, who will be appointed to administer their estate?

A

A trustee in bankruptcy

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28
Q

Once a company goes into administration, who is appointed to deal with their assets?

A

An Administrator

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29
Q

If there is no appointed executor, who is appointed to administer the estate of a deceased individual?

A

Personal Representative

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30
Q

What are the Guaranteed Minimum Pension (GMP) benefits?

A

Between 1978 and 1997

Members of DB schemes did not accrue any entitlement to additional State Pension benefits (SERPS/S2P)

If they were contracted out (“bought out”) of the DB scheme

They were entitled to the equivalent amount of benefits as if they had been accruing the additional SP benefits

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31
Q

What is the escalation of GMP benefits and how is it funded?

A

It is fully inflation proofed

Pain entirely by the state

32
Q

What is the main reason an employer might decide to provide death in service benefits through a separate insured scheme as opposed to through a DB scheme?

A

To ensure the DIS benefits do not drain the DB fund

33
Q

The International Accounting Standards 19

requires that a DB scheme’s surplus or deficit

must be shown on the company…

A

balance sheet

and the present value of past service liabilities should reflect high quality bond yields, rather than equity yields.

34
Q

What is pension “Increase Exchange”?

A

The option of giving up future guaranteed increases to your pension in return for a higher initial pension with no future increases.

35
Q

A PPF Section 179 valuation is to establish the…

A

Level of a DB scheme’s assets and liabilities

This is usecd to determine any scheme underfunding which is then used to determine the level of the scheme’s PPF levy

36
Q

If you are in serious ill health, you may have your pension fund commuted for a lump sum. If your pension fund was in excess of the LTA, and you were under the age of 75, how would the full lump sum be taxed?

A

Tax free up to LTA
55% thereafter

37
Q

If I contribute to my pension term assurance, how are the premiums treated for tax purposes?

A

There is no tax relief

Following December 2006

38
Q

If my employer contributes to my pension term assurance, how are the premiums treated for tax purposes?

A

There is tax relief as it is treated as a business expense

39
Q

After what length of employment must a company offer a preserved benefit?

What is a preserved benefit?

A

30 days

The value of the fund built up from employee and employer contributions

You can convert this to retirement benefits when you reach 55

40
Q

If I was being paid benefits from a group IP policy through my employer, how does this impact my annual allowance for contributions?

A

Group IP benefits are considered taxable, relevant, UK earnings

So the contributions are calculated based on that being your income

41
Q

Name the three features of targeted Money Purchase schemes

A
  • regarded as a DB / DC hybrid
  • it will incorporate regular reviews to monitor the intended benefit levels
  • the only promise is the benefit from the DC scheme

May be worth looking into these

42
Q

How do targetted money purchase schemes work?

A

They have a targeted benefit level

An actuary regularly determines the contributions required

If “the fund” falls short of the required amount it may be topped up by the employer (however nothing is promised)

Targeted benefit level could be a proportion of the final salary - hence the DB/DC combo

43
Q

Who else can receive the lump sum benefit from trivial commutation?

A

Dependants or nominees

44
Q

My husband just died. He worked for a company for a brief period 20 years ago. If possible, I would like to take his DB pension as a lump sum. What are the rules on this?

A
  • The value must be less than £30,000
  • You must be a dependant or nominee

Trivial commutation

Can’t be to a successor (the nominee of a nominee)

45
Q

Name as many circumstances as possible in which the payments from a scheme pension be reduced.

A

There are 9

  • Pension sharing order (1)
  • Scheme pays an annual allowance charge for the member (1)
  • Being paid on ill health or until SPA (2)
  • Legal/funding issues (5)

Not because of performance of with-profits funds or investments

Think of DB as being guaranteed against poor performance, not against all situations

46
Q

What are the HMRC requirements for Lifetime Annuities?

(3)

A
  • Payable for life
  • Paid at least once per year in arrears
  • Cannot be assigned/surrendered
47
Q

My annuity payment was calculated using an automated points system based on my lifestyle. What type of annuity have I purchased?

(1)

A

An Enhanced Annuity

48
Q

I’ve purchased an enhanced annuity. How is the payment calculated?

(2)

A

Via a points system

based on lifestyle.

49
Q

I am retiring in 2015. How many qualifying years do I need to be eligible for the full basic state pension?

Bonus points if you know what years are relevant

A

30 years

This is between 2010 and 2016
2016 being the year they switched to new state pension

50
Q

I’m retiring in 2018. How many qualifying years do I need to be eligible for the full basic state pension?

Bonus points if you know what years are relevant

A

35 years

From 2016

51
Q

I’m self-employed. Which NICs do I pay?

A

Class 2 and 4

52
Q

I have 5 employees in 2022. Which NICs will I pay?

A

Secondary Class 1

53
Q

I’ve reached SPA in 2022/23. I’m not ready to retire though, and would like to defer my State Pension. What are the rules on this?

(3) Brand 2 Q38

A
  • Must be deferred by a minimum of 9 weeks
  • Can only defer once
  • Must be taken as an income

Brand 2 Q38

54
Q

I’m 69 years old and in receipt of my State Pension benefits. I’m moving abroad and want to understand how this will impact my payments.

Do I continue to receive payments?

A

Yes

Generally, although you won’t be getting increases unless you move to a country which has a reciprocal social security agreement with the UK

Brand 2 Q39

55
Q

I’m 69 years old and in receipt of my State Pension benefits. I’m moving abroad and want to understand how this will impact my payments.

Will my payments continue to increase?

A

Yes if

you move to a country which has a reciprocal social security agreement with the UK

Brand 2 Q39

56
Q

I own a lifestyle fund.

“The switching to low risk securities occurs at pre set times and does not allow for market conditions”

True/False?

A

True

57
Q

I have a pension from when I worked at O2 at university. It’s worth very little. What is the title given to the rules surrounding the payment of this?

A

Small pots payment

Brand set 2 Q42

58
Q

I have a pension from when I worked at O2 at university. It’s worth very little. What is a small pots payment? Why bother?

A

If you have small pensions (specific rules allowing) you can take them as a lump sum which does not test against your LTA and does not trigger the MPAA

Brand set 2 Q42

59
Q

What are the rules around the Small Pots Payments?

(2)

A
  • Max of 3 non-occupational pensions (unlimited occupational ones)
  • £10,000 limit per payment

Can be taken from crystallised or uncrystallised payments

Brand set 2 Q42

60
Q

I’ve been accruing DB scheme pension benefits for 25 years but die before I reach retirement. Why can’t my dependant take the benefits as an annuity protection lump sum?

A

These can only be taken from schemes through a DC pension

DB pensions have their own death benefit arrangements. Annuity protection lump sum is not one of them and only takes place with DC arrangements
Brand set 2 Q43

61
Q

What is the maximum length of a short term annuity?

A

5 years

BS.2 Q44

62
Q

I am hoping to buy a short-term annuity. It can be guaranteed.

True/False?

A

True

Can be guaranteed for up to 5 years

BS2 Q.44

63
Q

I have a FAD. Can my death benefits go to:
- my dependant? or,
- my nominee? or,
- a successor?

A

Dependant - yes
Nominee - yes
Successor - no

This is called a survivor’s FAD

BS2 Q.45

64
Q

I have a FAD and die at age 74. What is the tax position on my beneficiary?

A

Tax free lump sum
It can go as a survivor’s FAD

BS2 Q.45

65
Q

I have a FAD and die at age 76. What is the tax position on my beneficiary?

A

Taxed at beneficiary’s marginal rate
Can go as a survivor’s FAD

BS2 Q.45

66
Q

What is the additional stamp duty paid when purchasing a buy to let property?

A

Extra 3%

BS2 Q.46

67
Q

What is the tax relief situation on mortgage payments?

A

You get basic rate tax relief on mortgage interest

BS2 Q.46

68
Q

Property investments often move in a different direction to equities.

True/False?

A

True

BS2 Q.47

69
Q

I can make a loan to my employer through my SIPP.

True/False?

A

False

BS2 Q.48

70
Q

(Definition) Who does cash flow modelling help?

(2)

A

Those who want to assess the level of income to take from their FAD

Whilst maintaining sufficient funds to meet their objectives

BS2 Q.49

71
Q

Can I reinvest my PCLS to get more tax relief?

(2)

A

No because it will fall foul of the anti-avoidance provisions

BS2 Q.49

72
Q

What are the anti-avoidance provisions?

A

The provisions in place to stop me from re-investing my PCLS for further tax relief

BS2 Q.49

73
Q

My mate says that it is possible to reinvest excess pension income into your pension and get more PCLS from this.

True/False?

A

True

Added benefit is also Death benefits increasing

BS2 Q.50

74
Q

My mate says that it is possible to reinvest excess pension income into your pension and get better Death Benefits than otherwise.

True/False?

A

True

Added benefit is also PCLS increasing

BS2 Q.50

75
Q

What are the benefits to re-investing my excess pension income into my pension?

(2)

A

Additional PCLS
Additional Death Benefits

BS2 Q.50

R04 (7 decks)

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