Part 5 - Treasury Management Flashcards
What are the tasks which must be completed for setting up a pensioner payroll? (5 marks)
🤍 Register as an employer with HMRC and get a login for pay as you earn (PAYE) Online
🤍 Choose your payroll software to record member details, pension amounts, calculate deductions, and report to HMRC
🤍 Collect and keep records
🤍 Tell HMRC about your scheme members and
🤍 Record pension payments, make deductions and report to HMRC on or before the first payment date and every subsequent payment date thereafter
The Trustees of their pension payroll provider must keep records of … (7 marks)
🤍 Different elements of pension, when they commenced and how and when they increased
🤍 Any pension review dates eg for ill health, children’s pensions or step up pensions (a step up could be required for example, where a pensioner reaches GMP payment age and the pension in payment needs to be increased to meet the GMP)
🤍 Details of the spouse/ civil partner’s benefits
🤍 Member’s bank account, address and tax details
🤍 Any continued life cover payable on early retirement
🤍 The date any guarantee period ends
🤍 The amounts of annual allowances used up by the member through relevant benefits crystallisation events (RBCE) in the scheme
FPS
Full Payment Submission
EPS
Employer Payment Summary
to be sent to HMRC by 19th of the following tax month where no payment was made by payroll
HMRC will levy a penalty against a pension scheme if (3 marks)
🤍 the FPS was late
🤍 they did not send the expected number of FPS’s
🤍 they did not send an EPS when the scheme did not pay any members in a tax month
Penalty for non submission of FPS/ EPS based on members
🤍 1 - 9
🤍 3 - 49
🤍 50 - 249
🤍 250 or more
🤍 £100
🤍 £200
🤍 £300
🤍 £400
What is a tax code?
A tax code is a reference used to calculate the amount of Income (if any) to deduct from a pensioner’s pension
Process HMRC uses to determine a pensioners tax code (3 marks)
🤍 Calculate all the tax allowances to which the individual is entitled
🤍 Calculate the level of income on which the tax has not been paid, and any taxable employment benefits
🤍 The tax code is based on the pensioners tax allowances, but this is reduced by the income on which the pensioner has not paid
What is a tax code made up of?
🤍 Numbers - which show how much income an individual can have before they pay any tax
🤍 Letter - which shows the individual’s situation and how it affects their tax free Personal Allowance
What is the standard personal allowance for the 2024/25 tax year?
£12,570
Tax code letter:
L
Entitled to the standard tax-free personal allowance
Tax code letter:
M
Marriage allowance and have received a transfer of 10% of their partners personal allowance
Tax code letter:
N
Marriage allowance and individual has transferred 10% of their personal allowance to their partner
Tax code letter:
S
Income or pension is taxed at the Scottish rate of Income Tax
Tax code letter:
C
Income or pension is taxed at the Welsh rate of Income Tax
Tax code letter:
T
Tax code includes other calculation to work out the individuals personal allowance
Tax code letter:
oT
Either the individuals personal allowance has been used up, or they have started a new job and do not have a P45, or they did not give their new employer the details they need to provide them with a tax code
Tax code letter:
SoT
For an individual living in Scotland, either there personal allowance has been used up, or they have started a new job and do not have form P45, or they did not give their new employer the details they need to provide them with a tax code
Tax code Letter
CoT
For an individual living in Wales, either there personal allowance has been used up, or they have started a new job and do not have form P45, or they did not give their new employer the details they need to provide them with a tax code
Tax Code Letter:
BR
All income from this pension is taxed at the basic rate of 20%. This is usually applied if an individual has got more than one job or pension
Tax Code Letter:
SBR
All income from this pension is taxed at the basic rate in Scotland of 20%. This is usually applied if an individual has got more than one job or pension
Tax Code Letter:
CBR
All income from this pension is taxed at the basic rate in Wales of 20%. This is usually applied if an individual has got more than one job or pension
Tax Code Letter:
Do
All income from this pension is taxed at the higher rate of 40%. This is usually applied if an individual has got more than one job or pension
Tax code Letter:
SDo
All income from this pension is taxed at the intermediate rate in Scotland of 21%. This is usually applied if an individual has got more than one job or pension
Tax Code Letter
CDo
All income from this pension is taxed at the higher rate in Wales of 40%. This is usually applied if an individual has got more than one job or pension
Tax Code Letter:
D1
All income from this pension is taxed at the additional rate of 45%. This is usually applied if an individual has got more than one job or pension.
Tax Code Letter:
SD1
All income from this pension is taxed at the higher rate in Scotland of 42%. This is usually applied if an individual has got more than one job or pension.
Tax Code Letter:
SD2
All income from this pension is taxed at the advanced rate in Scotland of 45%. This is usually applied if an individual has got more than one job or pension.
Tax Code Letter:
SD3
All income from this pension is taxed at the top rate in Scotland of 48%. This is usually applied if an individual has got more than one job or pension.
Tax Code Letter:
CD1
All income from this pension is taxed at the additional rate in Wales of 45%. This is usually applied if an individual has got more than one job or pension.
Tax Code Letter:
NT
No tax is paid on the individuals pension
What does K before a tax code mean and what circumstances would this happen?
The individual has income that is not being taxed another way and is worth more that their tax free Allowance
🤍 Paying tax they owe from a previous tax year through their wages or pension
🤍 Getting benefits they need to pay tax on, for example, state or company benefits
CPI
Consumer Price Index
RPI
Retail Price Index
When did statutory increases to pensions change from RPI to CPI
1 January 2011
What statutory increase is required on Pre 88 GMP
Built up from 6 April 1978 and 5 April 1988
Scheme is not required to provide any increases
What statutory increase is required on Post 88 GMP
Built up from 6 April 1988 and 5 April 1997
Increase in line with inflation (CPI) up to a maximum of 3%
Statutory increase on Pre 97 excess
No legal requirement
May pay on a discretionary basis
Statutory increase between 6 April 1997 and 5 April 2005
Must increase annually at increase in CPI for the 12 months ending the preceding Sept, max 5%
(Except AVC pensions)
Statutory increase for pension from 6 April 2005
CPI for the 12 months ending the preceding Sept, max 2.5%
Possible but not compulsory for trustees to adopt this lower rate
Which Act makes it a statutory requires for Trustees of an occupational pension scheme to open and maintain a bank account
Pensions Act 1995
What activities may a bank mandate be established for?
🤍 Payments to beneficiaries
🩶 Transfers out of members benefits
🤍 Payment of contributions to investment managers
🩶 Payment of expenses
When should mandates be reviewed?
🤍 Should be amends when any of the authorised signatories change
🩶 Following a review of the authorities, should be done annually to ensure they are still appropriate and current.
For DB schemes contributions are …
… pooled and invested for the benefit of the entire membership.
For DC schemes contributions are …
… invested for the benefit of an individual who has an individual account within the scheme.
The Trustees of a DB scheme must draw up what in relation to contributions
A schedule of contributions
What does a schedule of contributions/ payment schedule show
Shows what contributions should be paid to the scheme and when they should be paid
The Trustees of a DC scheme must prepare, maintain and revise, what
A payment schedule
What are contributions usually expressed as?
🤍 Fixed sum
🩶 Percentage of earnings
If contributions are expressed as a percentage what needs to be decided?
Which elements of a members pay are pensionable (set out in the scheme rules)
When do the Regulations under the Pensions Act 1995 require that the employer must pay any contributions
🤍 22nd of the month following the month in which the contributions are deducted from members pay, if paid electronically
🩶 19th of the following month if paid by other means
