Pensions and Investments Flashcards
Who can contribute to a Pension?
(1) Below age 75
(2) A UK Resident or relevant UK earnings
* Or resident in last 5 years while in the scheme / crown employees and spouses of
What are the contribution limits for pension contributions to qualify for tax relief
(1) Maximum annual contribution
(2) Annual Allowance amount and carry forward
(3) Annual Allowance tapering and penalty
(1) Greater of £3,600 or 100% of earnings.
(2) Annual Allowance of £40k, which can be carried forward for up to 3 years
(3) Tapered down to a minimum of £10k if Income exceeds £150k (£1 for every £2 )
* A charge at the marginal rate is made if the annual allowance is exceeded
* Can’t pay in more than net relevant earnings
* To carry annual allowance forward from a previous tax year, must have been a member of a registered pension scheme in that year, although no contribution needs to have been made.
How are pension funds taxed on death pre/post crystallisation and before and after age 75?
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Third party contributions If a pension contribution is made by someone other than the pension holder or their employer,
Tax relief is based on the tax position of the pension holder, not on the person making the contribution. So, if the contributor is over 75 but the pension holder is a relevant UK individual, tax relief will still be given. If a parent, who is a higher rate taxpayer makes a contribution to the pension of a non–taxpaying child, only 20% relief will be given even though the contributor is a 40% taxpayer.
As we have seen, an individual can receive tax relief on contributions to a maximum of the higher of £3,600 per annum or 100% of earnings. Separately an employer can contribute without limits employer will receive tax relief on their contribution, provided that it is wholly and exclusively for business purposes. However, there is an overriding limit referred to as the annual allowance.
Pensions Lifetime Allowance
Lifetime allowance £1,073,100 million 19/20
What four events trigger the Money Purchase Annual Allowance (MPAA) ?
(1) Drawing Income under flexi access draw down
(2) Uncrystallised funds pension lump sum (UFPLS)
(3) Converting capped drawdown to flexi access
(4) receiving income from flexible annuity
How does triggering the Money Purchase Annual Allowance (MPAA) impact max DC contributions?
Reduces DC annual allowance to £36,000, subject to normal tapering.
How do you calculate income tax on chargeable life gains?
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What qualifies as a VCT?
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What are REITS and how are they taxed?
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EIS
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Can losses from EIS and SEIS be off set against income tax?
Yes
Getting NI credits
4b – Getting National Insurance credits
If you’re not paying National Insurance contributions because, for example, you can’t work due to illness, or you’re caring for a child or an adult, you may be able to get National Insurance credits.
National Insurance credits help to build up your National Insurance record and so protect your entitlement to the State Pension. This means it’s important you get your National Insurance credits.
With some benefits (such as Child Benefit for a child under 12, Jobseeker’s Allowance, Employment and Support Allowance) you get National Insurance credits automatically, but there are some circumstances where you have to apply. It is important that you apply for Child Benefit even if you choose not to receive a payment to ensure that you receive your National Insurance credit.
For example:
if you care for someone for at least 20 hours a week you may be able to apply for Carer’s Credit
if you are looking after a child under 12 who is related to you, you might be eligible for Specified Adult Childcare credits
if you are the spouse or civil partner of someone in HM Forces and you have accompanied them on posting abroad since 1975, you may be eligible for National Insurance credits
Maximum investment in a Junior ISA and who is eligible
£4,367
Aged under 18 and do not have a child trust fund
Who is eligible for an ISA
Aged 18 for S & S
Aged 16 for cash
UK Resident or crown employee / spouse
Investing own money
