Chapter 4 - State Pensions and Pension Products Flashcards
Basic State Pension
Max £119.30 per week.
Must be claimed.
Paid 4 weekly
30 years NIC credits
Earnings Related Schemes
Must earn LEL for Class 1 NICs and not be contracted out of state scheme.
First Scheme - Graduated - April 61 and April 75.
Death, 50% payable to spouse. Small amounts.
1978 - SERPS
Upper band earnings. Between upper and lower, so 25% of middle band could be accrued.
2002 - S2P. To help low earners.
Could contract out but since April 2012 only through employer DB scheme.
Single Tier State Pension - From April 2016
35 years of NICs to get max £155.65 per week.
Minimum 10 years credits
If protected payment, this added to basic and increases by CPI.
Class 3A NICs can be purchased up to max of extra pension of £25 per week. Ends April 2017.
State Pension Age
Dec 18 to October 20 - both men and women age 66.
April 26 to April 28 - increase to 67.
Deferring State Pension
Can only do this once.
Increased income or lump sum. But post 6/4/16, increased income only.
10.4% per annum.
Payment of State Pension Overseas
UK res for 6 months
EEA country or Switzerland
Reciprocal agreement with UK.
Tax
In UK, taxed as usual
Outside, taxed in own country if double taxation agreement.
If no double taxation agreement, taxed as per UK AND own country.
Secured Income - Scheme Pension
DB or MP. Should know this!!
Lifetime Annuities
New Flexible Lifetime Annuities since April 2015
Conventional can avoid MPAA if paid by insurance company, payable for life and/or guarantee period, income must be level, rising or variable in line with HMRC criteria.
Investment Linked
WP or unit linked
Flexible annuities trigger MPAA rules.
UFPLS
Since April 2015
Can only be taken from uncrystallised MP fund.
MPA or ill health age.
If under 75
Sufficient LTA
If not, UFPLS must be reduced.
Or if payment does exceed LTA, excess taxed at 55% or put in flexi access drawdown and taxed at 25%.
If over 75
UFPLS of any size
Tax free part restricted to 25% of remaining LTA.
UFPLS cannot be taken if Primary and/or enhanced protection in place where lump sum protected is for more than £375k.
Scheme specific TFC > 25%
Lifetime allowance enhancement factor is less than 25% of proposed UFPLS.
Tax - LTA charge, income tax and IHT.
Unsecured Income - Drawdown
Capped or Flexi-Access
Short Term Annuity
Max term 5 years
If drawdown used to fund, risk is loss of investment growth…might have been better if left in the fund.
Why would you recommend short term annuity? Need good case….
Phased Retirement
Can do phased annuity purchase.
Funds crystallised periodically to provide fixed income amounts.
