Chapter 9 - State schemes and an Individual's pension planning Flashcards
Ken is entitled to the State Pension Credit. If he receives a Basic State Pension of £169.50 per week and has savings of £13,450, what is his deemed income calculated as?
a.£195.50.
b.£175.50.
c.£196.50.
d.£176.50.
d.£176.50.
Any savings are deemed to provide income of £1 for every £500 or part £500 of savings in excess of £10,000. So, for example, if someone holds £16,650 in an ISA, the income this is deemed to produce is (£16,650 – £10,000)/ £500 = £13.3. Therefore, as it is £1 per £500 or part thereof, this is rounded up to arrive at a deemed income of £14.
Chapter reference 9C3
The full rate of the new State Pension will always be set at a rate just in excess of the:
a.Basic State Pension.
b.Guarantee Credit.
c.Savings Credit.
d.Additional State Pension.
b.Guarantee Credit.
The full rate of the new State Pension will always be set at just above the basic level of
means-tested support. In 2024/25 terms the full rate of the new State Pension is £221.20 per week, compared to the BSP of £169.50 per week and the Guarantee Credit element of the Pension Credit of £218.15 per week.
Chapter reference 9A2A
Asif deferred the payment of his Basic State Pension when he reached his State Pension Age in March 2016. If he now takes the deferred amount as a lump sum, he will receive the pension he has deferred plus interest at:
a.2% above Bank of England base rate.
b.0.2% per week.
c.1% per week.
d.2.5% above Bank of England base rate.
a.2% above Bank of England base rate.
if they select the lump-sum option the payment they receive is based on the amount of State Pension payments that were deferred, with weekly compound interest added at 2% above the Bank of England base rate.
Chapter reference 9B3A
How does the Additional State Pension increase in payment each year?
a.By the greater of increases in the CPI, earnings and 2.5%.
b.In line with increases in the CPI.
c.By the lower of increases in the CPI, earnings and 2.5%.
d.At a fixed rate of 2.5%.
b.In line with increases in the CPI.
The Additional State Pension is paid in addition to any BSP entitlement and increases each
year, based on increases in CPI (i.e. it is not subject to the triple lock guarantee).
Chapter reference 9A1C
Harry’s starting amount for the new State Pension was calculated as being equal to the full level of the new State Pension. This is most likely to be because at the time he was aged:
a.58 and has been self-employed for his entire working life.
b.58 and prior to 6 April 2016 was always contracted out of the Additional State Pension.
c.38 and prior to 6 April 2016 was always contracted out of the Additional State Pension.
d.38 and has been self-employed for his entire working life.
a.58 and has been self-employed for his entire working life.
Starting amounts will vary depending on an individual’s NIC record.
Individuals with a starting amount equal to the full level of the new State Pension
- worked the majority of their working lives as low earners; or
- been self-employed for the majority of their working lives; or
- spent significant periods receiving NI credits.
Chapter reference 9A2B
Ronan reached his State Pension Age in August 2024. If he defers taking his State Pension, what is the minimum period of deferral and by what rate will his State Pension be increased?
a.Five weeks and it will increase by 10.4% for every year of deferral.
b.Five weeks and it will increase by 5.8% for every year of deferral.
c.Nine weeks and it will increase by 5.8% for every year of deferral.
d.Nine weeks and it will increase by 10.4% for every year of deferral.
c.Nine weeks and it will increase by 5.8% for every year of deferral.
An individual who reaches their SPA on or after 6 April 2016 is still able to defer receipt of their State Pension. However, the rules surrounding the deferral have changed, as follows:
- individuals need to defer for at least nine weeks to receive any increase in the income they receive;
- the rate of increase during deferral has been reduced to 1% for every nine weeks deferred. This works out at an increase of just under 5.8% for every full year of deferral;
- there is no option to take the deferred amount as a lump sum; and
- it is not possible for a surviving spouse/civil partner to inherit deferred State Pension, although the deceased’s estate may claim up to three months’ arrears of their State Pension
Chapter reference 9B3B
Hannah’s husband died in a work related accident in May 2024. If they have two children aged five and seven, what rate of Bereavement Support Payment will she be entitled to?
a.£2,500 initial payment plus £250 per month for 18 months.
b.£3,500 initial payment plus £350 per month for 18 months.
c.£3,500 initial payment plus £350 per month for 12 months.
d.£2,500 initial payment plus £100 per month for 12 months.
b.£3,500 initial payment plus £350 per month for 18 months.
There are two rates of Bereavement Support Payment:
Higher rate: £3,500 initial payment, £350 per month for a maximum of 18 months.
Standard rate: £2,500 initial payment, £100 per month for a maximum of 18 months.
The higher rate is payable to:
* claimants who are pregnant at the time of their spouse/civil partner’s death (or the partner
they were living with as if married or in a civil partnership with); or
* who were receiving, or were entitled to receive, child benefit.
Chapter reference 9B7
Under current legislation the new State Pension typically increases each year in line with the ‘triple lock’, which is the:
a.higher of average weekly earnings, RPI and 2.5%.
b.lower of average weekly earnings, CPI and 2.5%.
c.higher of average weekly earnings, CPI and 2.5%.
d.lower of average weekly earnings, RPI and 2.5%.
c.higher of average weekly earnings, CPI and 2.5%
The new State Pension and the BSP are increased in payment in April each year by the higher of earnings, measured by the increase in average weekly earnings, prices and 2.5%
(the so-called triple lock).
Chapter reference 9B2
Yvette reached her State Pension Age on 1 June 2024. Why is she NOT entitled to any State Pension?
a.Her only income over the last 20 years has been the State Carer’s Allowance.
b.She has not accrued ten qualifying years of National Insurance contributions.
c.She has been self-employed for her entire working life.
d.Prior to 6 April 2016 she was always contracted out.
b.She has not accrued ten qualifying years of National Insurance contributions
The rules that apply from 6 April 2016 are as follows:
- individuals need a minimum of ten qualifying years (through contributions or credits) to
receive any State Pension; - the full rate of the new State Pension for 2024/25 is £221.20 per week and the Government has confirmed that this will increase in line with the triple lock.
- to obtain a full new State Pension, individuals need at least 35 qualifying years (through
contributions or credits); - a higher pension may be payable if the individual has any entitlement to Additional State
Pension (i.e. GRB, SERPS or S2P) accrued prior to 6 April 2016; and - Class 1, 2 and 3 NICs all accrue the new State Pension at the same rate.
Chapter reference 9A2A
Lisa, who is aged 70, moved abroad when she retired. She receives the UK State Pension, but it is not increased each year. This is most likely to be because she:
a.lives in Germany.
b.lives in Switzerland.
c.is still classed as a UK resident because she spends six months a year in the UK.
d.is resident outside of the EEA.
d.is resident outside of the EEA.
The UK State Pension can be paid to someone even though they are living abroad. If this is
on a permanent basis, then whether they receive the annual increases will depend on where
they live.
They may be entitled to the annual increase to their State Pension if they live in:
- the UK for six months or more each year;
- an EEA country;
- Gibraltar;
- Switzerland; or
- a country that has a reciprocal social security agreement with the UK, other than Canada
or New Zealand.
Chapter reference 9B5
