Pensions

Question 1

What are the 2 types of pension scheme?

Answer 1

Occupational (OPS)

Personal (PPS)

Question 2

Occupational pension scheme (OPS)
Who can contribute?
What are the 2 sub types of scheme?

Answer 2

Employee and employer

Types of Scheme:

Money purchase
Relate to performance of investment

Defined benefit - relate to earnings

Question 3

Personal pension scheme
Who is it available to?
Contributions made by?
Type of scheme?

Answer 3

To anyone under 75
Contributions made by individual/3rd party
PPSS are usually money purchase schemes - performance of investment

Question 4

Personal pension relief
How much relief?
How is relief given?

Answer 4

Relief based on highest tax band you are in
Initial 20% relief given by making net 80% contribution to pension fund whilst fund increases by 100%
Additional relief received through extending basic rate band for higher rate tax payers and higher for additional by the gross contribution

Question 5

Occupational pension relief
How much relief?
How is relief given?

Answer 5

Relief based on highest tax band you are in

Deducted gross from gross salary before taxes ensuring relief at source

Question 6

When is pension costs an allowable expense against trading income?

Answer 6

All employer pension costs are allowable but only when PAID!

Question 7

What is the maximum gross contribution that can be made per year?

Answer 7

Higher of:

Relevant earnings -
Taxable trading+ employment income

£3,600

Question 8

What is the overriding annual allowance for pension contributions per year that grant tax relief
Any carry forward relief?

Answer 8

£40,000

Can carry forward unused allowance for 3 years on a FIFO basis

Question 9

What is the annual allowance charge?

Answer 9

If contributing more than the annual allowance of 40k a charge is added to the income tax liability
No numeric knowledge needed

Question 10

What is the restriction on annual allowance for higher earners?

Answer 10

The allowance is tapered for higher earners

Do not need to know this numerically

Question 11

What is the lifetime allowance?

Answer 11

£1,073,100

Question 12

Drawing pension
Minimum age?
Tax free lump sum cap?

Answer 12

55
Capped at 25% of the lower of:
Value of the fund
Lifetime allowance

Question 13

How is drawing from a pension fund funds over the lifetime allowance taxed?

Answer 13

At either 55% or 25% depending on how it is drawn

No additional knowledge is needed