Chapter 1 - Contributing to Pensions

Question 1

Pension Contributions

Answer 1

As much as like
TR limited £3600 if no rel or 100% of RE
Under 75 for contributions
UK Res

Question 2

Tax Relief

Answer 2

At source. Cont paid net
Employer scheme. Net pay
Employer cont. paid gross Wholly and exclusively.

Question 3

ANI

Answer 3

Total grossed up income from all sources.
Less deductions, eg charity, trading losses.
Pension cont can reduce ANI to reduce tax.
ANI over £100k… PA lost £1 for every £2 of ANI. All lost at £122k.

Question 4

PCLS Recycling

Answer 4

Unauthorised payment (charged) if..
All PCLS received last 12 months is over £7500
If greater than normal. 30% more 
Extra conts more than 30% PCLS
If conts can be made by someone else 
Recycling pre planned

Question 5

Advantages of Pensions in LL

Answer 5

Potential TR
Possible restoration of PA
Boost retirement funds. Bigger pot
Out of estate cash 
Gifting out of estate out of income.

Question 6

Disadvantages in LL

Answer 6

Short time frame. Need medium or high ATR
No TR after age 75
Pension income means tested
Advice costs money

Question 7

Pension Input Period

Answer 7

Run in line with tax year. Cant be changed.
Input amount is total gross for MP.
Not in year of death. Or terminal illness

For DB…increase in value of benefits with CPI and factor of 16.
Eg… if benefit increase is £5000 from £20k…
£20k x 16 = £320k
£25k x 16 = £400k
So…annual allowance input amount is £80k

Question 8

Annual Allowance Charge

Annual Allowance is £40k.

Answer 8

If input exceeds allowance. Excess charged at persons marginal rate. If more than £2k, scheme might pay, but subject to input value being greater and pension benefits may be reduced to compensate.

Question 9

AA

Answer 9

Was £215k. 2010/11 reduced to £50k with 3 carry forward years. Now £40k.

Question 10

MPAA

Answer 10

£10k only once benefits been accessed.

Question 11

AA - the past.

Answer 11

Carry forward. 3 tax years.
Must have been member of reg scheme.
Must use current year first. Then chronological order.
Does not need to have UK RE.

Question 12

AA - 2015/16

Answer 12

Transitional. PIP now for tax year.
New PIP from 9/7/15 but closed 5/4/16 so half a year, so prev year into two halves.
So, as one off, AA was £80k for that year if member of scheme at 8/7/15. Input relevant to pre alignment year only.

Question 13

Carry forward

Answer 13

3 years only. Max £40k less any amount used in post alignment year.

Question 14

AA - the present.

Answer 14

AA tapered for high earners.
2 tests.
First get net income.
Adjusted Net Income Test. Has to be at least £150k to meet test. Adjusted income is NET Income plus net pay contributions plus employer input value.

Threshold Income Test. At least £110k.
This is net income plus any salary sacrificed for pension contributions less gross amount of any relief at source contributions.

Question 15

MPAA

Answer 15

Triggers.
Income withdrawal from drawdown.
Takes UFPLS
Convert pre April 15 capped drawdown to flexi.
Takes more than permitted in capped.
Receives lump sum where primary protection exceeds £375k.
Payment from lifetime annuity
Pension from MP if less than 11 members.
From overseas funds as above.
Entering flexi drawdown pre 5/4/15.

Triggered is member only takes these. Not dependants.
MPAA there to determine is client has to ‘pay back’ tax relief in form of AA charge.