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SA4 > Chapter 3 - Encouraging Private Pension Provision > Flashcards

Chapter 3 - Encouraging Private Pension Provision Flashcards

1
Q

When did the single tax regime come into force?

A

A-Day

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2
Q

Under the new regime, what level of contributions can individuals claim personal tax relief on (ignoring the AA)?

A

The higher of £3,600 and 100% of annual earnings (including 3rd party contributions)

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3
Q

Are there any limits on employer contributions eligible for tax relief?

A

No (apart from the AA)

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4
Q

What is the AA?

A

A limit on the total amount of contributions and benefits that can be built up in registered pension schemes in any one year

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5
Q

What is the AA for 13/14 and 14/15?

A

50k in 13/14 reducing to 40k in 14/15

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6
Q

How are contributions paid valued for testing against the AA?

A

The monetary amount of contributions paid

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7
Q

How are benefits in excess of the AA charged?

A

At the individual’s marginal rate

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8
Q

What are the 2 key features of the single tax regime in the UK?

A

Annual Allowance and Lifetime Allowance

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9
Q

How are benefits accrued valued for testing against the AA?

A

16 times the increase in accrued pension entitlement over the year, after allowance for CPI increases to the pension entitlement at the start of the year

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10
Q

When does the AA not apply?

A

In the year of death or IHER

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11
Q

Can you carry forward unused AA?

A

Yes for 3 years

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12
Q

What is the LTA?

A

A limit on the total value of a members aggregate benefits from registered pension schemes subject to tax relief

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13
Q

What is the LTA for 13/14 and 14/15?

A

1.5m for 13/14 reducing to 1.25m for 14/15

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14
Q

When are benefits assessed against the LTA?

A

Death, retirement, overseas transfer, age 75

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15
Q

How are scheme benefits valued for testing against the LTA?

A

20 times pension payable (or higher depending on scheme increases)

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16
Q

How are pensions already in payment at A-Day valued for testing against the LTA?

A

25 times pension payable

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17
Q

How are lifetime annuities valued for testing against the LTA?

A

The market value of the fund used to purchase the annuity

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18
Q

How is TFC valued fir testing against the LTA?

A

Face value

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19
Q

How are benefits in excess of the LTA taxed?

A

55% for lump sum payments, or for pensions a one off 25% charge followed by continuous taxation at the individual’s marginal rate

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22
Q

Over what period does the AA apply?

A

The pension input period

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23
Q

How does Primary protection work?

A

An enhancement factor is applied to the members LTA, and this same factor is then applied to the standard LTA when the benefits come into payment

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40
Q

What are the 2 types of transitional protection to protect benefits accrued prior to A-Day against the new single tax regime?

A

Primary protection and Enhanced protection

41
Q

What condition has to be met to apply for Primary protection?

A

Value of aggregate rights under all registered schemes must be greater than 1.5m at A-Day

43
Q

How is the enhancement factor for Primary protection calculated?

A

The percentage by which the value of the members benefits exceed 1.5m at A-Day

44
Q

What restriction is imposed on future accrual under Primary protection?

A

Accrual can continue but only benefits up to the enhanced LTA are protected from the tax charge

45
Q

Who can apply for Enhanced protection?

A

Anyone irrespective of value of benefits accrued at A-Day

46
Q

What protection does Enhanced protection offer?

A

All benefits up to A-Day are protected

47
Q

What restrictions does Enhanced protection carry?

A

No further relevant benefit accrual is permitted

48
Q

Can Enhanced protection be given up at a later date?

A

Yes, and they can still benefit from any Primary protection. They can not switch back at a later date

49
Q

What are the two forms of protection available from 14/15?

A

Fixed protection 14 and Individual protection 14

50
Q

Who can apply for FP14?

A

Anyone who doesn’t have Primary or Enhanced protection

51
Q

What would the LTA be under FP14?

A

1.5m is retained

52
Q

Can individuals continue to accrue benefits under FP14?

A

No, if they do protection is automatically lost and the LTA of 1.25m applies

53
Q

Who can apply for IP14?

A

Individuals whose benefits are are in excess of 1.25m and who doesn’t have Primary protection (including dormant cases where they have Enhanced protection)

54
Q

What would the LTA be under IP14?

A

Equal to the value of the benefits at 6 April 2014 subject to a maximum of 1.5m (an ‘individual LTA’)

55
Q

Can individuals continue to accrue benefits under IP14?

A

Yes, as long as at a BCE they do not exceed the value of the individual LTA

56
Q

What tax concessions are available for monies set aside in a registered pension scheme?

A

E’er contributions are treated as a business expense, e’er contributions are not classed as benefit in kind, e’er contributions are not subject to NI, e’ee contributions are not subject to income tax, e’ees can claim full tax relief on contributions made by 3rd parties

57
Q

What tax concessions are available for investments in a registered pension scheme?

A

Investment income is not taxed (but you can not reclaim corporation tax paid on dividends), capital growth is not taxed

58
Q

What tax concessions are available for benefits payable in a registered pension scheme?

A

LSDB are not subject to tax (provided paid at t’ee discretion), TFC not subject to tax, ROC up to 20k are only taxed at 20%, pension income is taxed as per other income

59
Q

What name is given to an occupational pension scheme which is not registered?

A

An Employer Financed Retirement Benefit Scheme

60
Q

Why do EFRBS still exist?

A

They used to exist as limits applied to the value of benefits that could be accrued in a registered scheme. Since these limits fell away at A-Day the exist purely to take advantage of benefit structures that are not allowed in a registered scheme (e.g. retirement before age 50)

61
Q

How are EFRBS financed?

A

Funded in advance or unfunded

62
Q

How are contributions to EFRBS treated?

A

From 6 April 2011 they must be accounted for under PAYE and in future are subject to NI (to prevent disguising remuneration)

63
Q

What is the maximum TFC that can be taken at retirement in a registered scheme?

A

25% of the value of benefits within the LTA

64
Q

How is the maximum TFC amount determined for a DB scheme?

A

20 x pension x CF
20 + (3 x CF)

65
Q

What age limits apply to receiving benefits from a registered scheme?

A

Minimum age 55 (except for IHER), at age 75 a BCE is triggered and benefits are designated as an alternatively secured pension (but don’t have to come into payment)

66
Q

How are lump sum death benefits tested against the LTA?

A

On death before 75, benefits in excess of the LTA are taxed at 55%. There is no liability to inheritance tax if t’ee discretion is applied.

On death after 75, the whole lump sum is subject to a 55% charge but no inheritance tax would be payable.

67
Q

Do pension rights given up on divorce count towards the member’s or ex-spouses LTA?

A

Ex-spouses

68
Q

Do pension rights given up on divorce count towards the AA?

A

No

69
Q

How are pension death benefits tested against the LTA?

A

They are not

70
Q
A
71
Q
A
72
Q
A

SA4 (3 decks)

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