BCE 1-4 with valuations
BCE 1 drawdown pension - defined contribution fund assets to provide for the payment of a drawdown pension during the members lifetime - market value of the fund
BCE 2 - scheme pension - member is entitled to take a pension and is x 20
BCE 3 - excessive increase to scheme pension in payment is increase x 20
BCE 4 purchase of a lifetime annuity member becomes entitled to one under a defined contribution arrangement before 75 crystallised is market value of the memebrs drawdown fund used takeaway the value of the fund designated at outset. uncrystallised is amount used to buy
BCEs 5 -D
5 - defined benefit test at age 75.This is when they have not taken it times by 20 plus the lump sum
A- test at the age 75 for drawdown pension the mem reaches 75 with a earlier designated drawdown pension fund which has not been secured by a lifetime annuity/ pension this is market value of the members drawdown pension at age 75 less the market value of that designated to drawdown at outset.
B - test at age 75 for uncrystallsied defined contribution funds. The member reaching age 75 under a defined contribution arrangement in which there are remaining uncrystallised funds test is market amount.
C - uncrystallised funds designated for drawdown following the members death. Member dies and tbe uncrystallised funds remaining are designated before the end of the two year window to a dependant’s or nominees flexi- access drawdown. Market Value designated for drawdown.
D- uncrystallised funds used to purchase an annuity following the members death within the two years this is market
BCE to 9
BCE 6 relevant lump sums the member becomes entitled to a lump sum and the amount is the lump sum
BCE 7 relevant lump sum death benefits from uncrystallised funds of a defined contribution or any from a defined benefit. The anoint of the lump sum
BCE 8 - transfer oversees the value transferred to a QROPS
BCE9 - prescribes event where certain payments are made in respect of a member that constitutes a prescribed event
LTA
- following the abolition of the Lifetime allowance no lifetime allowance is on any benefits on excess. Instead they pay tax on any amount over for :
- serious il health lump sums
- life time allowance excess lump
- defined benefit lump sum death benefit.
- uncrystallised funds lump sum death benefits
relevant UK earnings
- employment from salary wages bonus overtime or commission
- general earnings from overseas crown employment
- income arising from patent right
- Earnings from a trade including partners and trady
UK relevant individual
- must be under 75
and have relevant earnings that will be taxable for that year
or resident in the uk for some time during that year
or was resident at some time during the 5 tax years before in which the contribution was made. Relief in these circumstances is a maximum of £3,600.00
Additionally crown employees can be
If they are not a relevant UK individual then they may make contributions but won’t be eligible for relief
tax relief minimum
- the maximum an individual can make is either 100% of earnings or £3,600.00 minimum
- children can receive £3,600.00 on the basis of £0.00 but if they earn more they can contribute more.
- if anyone earns more they would get it at marginal rate of income tax. Also works out £300.00 income tax
The Net pay Method and benefits
- occupational schemes allow this but not group individual or stakeholder
- with the net pay method the employee contributions are taken from the employees gross pay before income tax is deducted.
-ie if they want to contribute £100 and they are higher rate tax payer
40% x £100 is £40.00
- Although only income tax is reduced national insurance are calculated on gross salary. National Insurance Contributions are not reducing
relief at source
Contributions are paid net of basic rate of tax
- if teh employee is making a contribution of £100.00 the net contribution is £80 and is decudcted from the employees net pay (ie their pay after tax and NICs have been deducted) the pension pricier then reclaims the 20% basic rate tax relief . as the employee is a higher rate tax payer they can claim this via self assessment or their tax code.
- with self assement the additional relief is awarded by adding the cross amount of the continuing to the employees basic rate tax band and higher rate tax band. This providers the additional tax relief by increasing the anmounted taxes at the lower rate.
- stakeholder and personal pensions (including group ones) receive tax relief via the relief at source method.
-retirement annuity contracts prior to 2006 used gross and the indivisible reclaimed all their tax relief via relief via self assessment or adjustment to their tax code. this m this is known as the relief on making a claim method. Can continue or change this way
timing tax relief
- a payment on account 31 january during the current tax year (31 january 2024 for 2023/24) this is 50% of the previous years liability
- a second payment on account 31 july following the end of the tax year. 2024 for 2023/24 will be 50%
- a final payment on 31 January following the end of the tax year 31 January 2025 for 202324 - this is the difference between the years total tax bill and the two payments on account is made.
- dividends
salary sacrifice
- it allows decisions in NI and income tax
- reduces take home pay when no pension has been paid.
- for others it either gives the same amount of higher.
- to work out the relief you need to times the pension contribution by income tax and national insurance ie 20% and 12%
- personal allowance may be reinstated
- saves the corporate NI as well
pension recycling
- unauthorised payment for all PCLS where it exceeds £7,500
- date is 1 callander year for the PCLS
- if the PCLS is 30% larger than expected
- the cumulative sum of the extra contributions exceed 30% of the PCLS.
- the recycling was pre planned
- the additional contributions are made by the individual or by someone else such as an employer
employer contributions
- no limit
- income tax relievable for sole trader and partner and corporation for limited company as it is gross
- ## must passed wholly and exclusively for HMRC to get behind it
employer contributions and accounting periods
- is usually given in the same accounting period
- it is not where a loss is created that can be carried back or where a large single contribution is mede that is subject to spreading for tax relief purposes
accounting period
- if it exceeds 210% of the contribution paid in previous chargeable period and the amoubt of the excess ( defined as the amount paid over and above 110% of the contribution paid in the previous chargeable period) is £500,00.00 or more
an employer contribution does not have to spread if the increased contribution is attributable to the funding of cost of living rises for pensioner member or future service liabilities for new scheme entrants
£500,000.00 - £999,999.00 2 accounting periods
£1,000,000 - £1,999,999.00 3 accounting periods
£2,000,000.00 or more 4 accounting periods
defined benefit and cash balance pension input period
- get the starting amount of the pension at the start of the year may need to work this out. Then get it times it by 16 and the CPI increase of the september in year before
- get the closing amount of pension and times it by 16
- take the difference of eachother
- this is the total input amount recieved - remember there may be an annual allowance taxed
threshold income
(gross income - gross member contribution ) + ( income given up for salary sacrifice or felxi renumeration - taxed lump sum death benefit )
- if it’s over £200,00.00 need to do another
Adjusted Income
(gross taxable income + employer contribution) - taxed death benefits
annual allowance and carry forward
- the maximum is £60,000.00
- can use carry forward this helps do scheme where someone suddenly gets a spike in money at one time
- they can carry forward allowances.
- need to use current one first
- Must be a pension member
- £40,000.00 for other years
MPAA
- UFPLS
- First draws from a flexi access drawdown fund including a flexi annuity.
- notifies scheme administrator that they want to convert a pre2016 april 2015 called drawdown into flexi and does take funds
- takes more than allowed from capped
- received a stand alone lump sum when entitled to primary protection where the lump sum protection was greater than £375,000.00 on 5 April 2006
- received a lifetime annuity where the annual rate of payment can be decreased in other permitted circumstances
- receives a scheme pension directly from the funds of a defined contribution arrangement where they are providing scheme pensions for 11 or less member
- Payment of one of these from an overseas pension scheme that has had relief
MPAA rules and benefiqcries
- it is not triggered if a dependant takes benefits from the pension arrangements ie flexible access drawdown or annuity etc when it’s in relation to someone else’s pension
MPAA is not set
-PCLS
- trivial commutation
- payment scheme pension from defined benefit arrangement
- small pot
- received a payment from scheme pension paid directly by defined contribution where there are 11 members or more are receiving a scheme pension paid directly from scheme funds
- life time annuity
- received a scheme pension secured by way of an annuity from a defined contribution fund of any size.
-takes no more than maximum from a pre 6 April 2015 capped drawdown
- received a lifetime annuity where payments can not go down expect in prescribed circumstances l.
- received a payment from a dependants ( or nominees or successors flexi- access drawdown fund.
alternative allowance
- this is £50,000.00 for db and
- pensions savings tested against the MPAA are not tested against the annual allowance.
- if they go over this there is an alternative amount due - taxed at marginal rates
MPAA cash balance meant arramagment - paying half way through
- unlike pre and post the the allowance is divided up into an apportionment
- if you triggered the MPAA on the 265th day of the period the proportion of the amount tested is 100/365 times the pension input amount.
