Chapter 4 - Pensions

Question 1

What is an occupational pension scheme?

Answer 1

Run by employer for a group of employees

Question 2

What is a personal pension scheme?

Answer 2

Run by pension provider and open to an individual to join

Question 3

What are the tax impacts of occupational schemes?

Answer 3

Individual’s contributions:
Contributions deducted from eployment income before IT calculated.
Employer contributions:
Exempt benefits for the employee.
Employer contribution also deducted from trading profits.

Question 4

What are the tax impacts of personal schemes?

Answer 4

Individual's contributions:
Raises tax bands by gross contribution. 
Also reduces ANI
Employer contributions:
Exempt benefits
Employer contribution also deducted from trading profits.

Question 5

What is the limit on individual’s gross contributions:

Answer 5

Higher of:

1) £3,600
2) Relevant earnings of individual (employment income + trading profits).

Question 6

What is the annual allowance?

Answer 6

Overall limit on gross tax-relievable pension contributions into an individual’s pension fund in a FY.
Allowance = £40,000 pa.