Pension Contributions Flashcards
What are the three additional state pension schemes?
- SGPS
- SERPS
- S2P
What was ‘contracting out’?
Members of DC or DB schemes were taken out (partly or wholly) from SERPS & S2P
How did DC schemes make up for the additional state pensions contracting out??
NI rebates were paid into the schemes
How did DB schemes make up for the additional state pensions contracting out?
Ni contributions were reduced and and replaced by scheme benefits
Tax relief for personal pensions is made through what method?
The relief at source method
Employer sponsored schemes use what methods of contributions?
Relief at source and net pay methods
Explain how the relief at source method works?
Basic rate relief is added at source
Basic rate relief is reclaimed from HMRC by the provider
Higher/add rate tax claimed through self assessment or reduction in tax code
Explain how net pay method works
contribution taken from gross pay before deductions so tax relief awarded immediately.
No need to claim via self assessment
What method do RAC’s use?
Contributions were made gross and individuals claimed the tax relief via self assessment. They can now choose to keep this method or opt for relief at source
If the recycling of a PCLS is over the prescribed limits how do HMRC treat the contribution?
As an unauthorised payment
What are the limits that apply to the recycling of a PCLS?
- When added to any other PCLS in the previous 12 months it exceeds 7,500 (after 4/2015) or 12,500 (before 4/2015)
- The recycled PCLS is 30% or more of the current contributions
- The cumulative sum of extra contributions exceeds 30% of the PCLS
What two criteria must also be met in terms of types of people and deliberate actions with regards to PCLs recycling
- Must be made by the individual or someone else (employer)
2. Recycling must be pre-planned
