R04 Flashcards
Autoenrolment introduced when? Single SP?
2012
2016
Pension Minimum Funding?
PPF formed?
1995
2004
A-Day?
Main Changes?
04/2006
ATAC
- Allowances: LTA, AA
- Tax Regime simplified
- Annuity Avoidance/Alternatives
-Concurrency: Personal & Occupational
Annuities increase by 3% for each?
+30 basis points in GILTs
Financial Advice exempt from IT/NICs up to?
Pensions advice allowance?
£500
£500, on max x3 occasions
DB Pension benefits depend on?
Time Served
Renumeration
Accrual Rate
Tax regime for ‘registered schemes outlined in?
Pensions Tax Manual
To qualify for tax relief must be?
<75 +
Relevant Earnings
Resident in UK (Or prior 5yrs)
Net Pay Method?
PCs before IT deducted (IT on ‘Net’ amount)
Relief at Source?
PCs paid after BR tax, further relief claimed for HR/AR
Self-Ax Tax deadlines?
End of Jan: 50%
End of July: 50%
Following End of jan: Balancing Payments
Salary Sacrifice useful as?
Reduced NICs, could be recycled. May return allowances.
General Recycling PCLS rules?
Subsequent higher PC, or, additional PCs >30% PCLS.
Pre-Planned
PCLS + Prev PCLSs in 12 mths >£7500 since 2015 (1% SLA Pre-2015)
6 PCLS Recycling Rules?
- Receives PCLS
- PCLSs >£7500
- PCs in 12 mths >30% PCLS
- Paid by Individual/Employer/Party
- PCs >Expected due to PCLS
- Pre-Planned
PCLS Recycling: Additional PCs exceeds 30% PCLS terms?
Relevant Tax year + 2yrs Pre- and Post-PCLS
PCLS Recycling: PCs greater than expected terms?
Does not count if individual does not have control e.g. employer increases PCs across the board.
Spreading of large ‘non-regular’ employer PCs if?
- If >210% vs prev chargeable period.
- Relevant excess (XS over 110% prev chargeable period) is >£500,000
Employer PCs: ‘Relevant Excess’ spreading periods?
£0.5-£1m: 2yrs
£1-£2m: 3yrs
>£2m: 4yrs
Annual Allowance?
Carry forward?
Tapering rules?
£60k
3yrs
Adjusted Income >£260k: Reduced by £1 for every £2, to £10k (£360k)
Threshold income: Full AA if <£200k
AA: Adjusted Income?
Threshold Income?
Protects who?
In order to taper which tests must fail?
Total income + PCs
Total income - PCs
‘Lower’ salaries with spikes in PCs
Both
Charge for exceeding AA?
Marginal rate on higher of:
- Default Chargeable Amount: Pension input in to all schemes
- Alternative Chargeable Amount: DB schemes - Alternative AA
AA: Elect for scheme pays if?
With?
> £60k (Even if tapered/MPAA)
£2k
Relevant reduction in pension.
Result of MPAA being triggered?
Only £10k in to DC scheme.
Keep £60k AA - for DBs.
No carry forward.
MPAA triggered when?
Pension flexibly accessed:
- UFPLS
- FAD
- Flexi-Annuity
- Exceeding Cap on Capped Drawdown
MPAA not triggered when?
TFC
‘Secure income’: DB/Annuity
Capped Drawdown
Small Pots
Survivors Pensions
MPAA tiggered at:
1. Start + Subsequent <£4k?
2. Start + Subsequent >£4k?
3. Later?
- Standard AA.
- Alt AA £50k (AA-MPAA). Savings tested against MPAA not AA.
- DC input after date tested against MPAA
- DC As per Contributions
- DB As per time
DC savings exceed MPAA?
Higher of?
Default Chargeable Amount: Input - AA
Alternative Chargeable Amount: (DB-Alt AA) + (DC-MPAA)
Working out DB PCs?
‘Pension Input Amount’: Closing Value - Opening Value
DB AA: Opening Value? Closing Value?
O: Pension x 16 x CPI
C: Yrs Pension Increase x 16
LSDB when member dies >75?
Taxed at marginal rate.
Pre-2015 ‘Flexible Drawdown’?
No limit to income if taking secure income.
Pre-24 if exceeded LTA?
25% charge on XS used for income
55% charge on XS used for LS
LTA: Benefits paying Pre-A Day tested how?
‘Flexible Drawdown’ after 2014?
Capped after 2015?
25x Yrly pension at first BCE.
25x 80% Max Yrly Pension (Max Capped amount 150% GAD Basis)
‘Two year window’ applies to?
When death benefits must be ‘designated’ to income.
Normal pension age? Increases to?
55
58
Commuting Pensions for Cash:
Small Pots?
DB Schemes can use?
Occupational Schemes
Small Pot LS <£10k
Trivial Commutation LS <£30k
Winding-Up LS
Small Pot rules?
PPs: Arrangement <£10k, Stop all rights under arrangement, Payable up to x3.
Occ Ps: SCHEME <£10k, No Limit to use, No Transfers out within 3yrs
Can take trivial commutation LS if ? <£30k
DB arrangements, IPMPISP
Tax of:
Small Pots?
Trivial?
SP: Crystallised as income, Uncrystallised as 25% TFC, 75% income.
Trivial: 25% TFC, 75% income
- If Scheme Pensions: as income
Scheme pension from DC only triggers MPAA if?
<11 others entitled
PAYE on Flexible Payments usually starts with?
‘Month One’ basis: taxed as a monthly payment e.g. 1/12th BR Band.
‘Unused Funds’ are?
Funds not crystallised by age 75, may have been LTA tested.
Pension/Annuity Protection LD Death Benefit?
Pension x20, or, Lifetime Annuity Amount
Trust Special LS Death Benefit Charge?
45%
What are Retirement Annuity Contracts?
Personal Pension Plans starting pre-1988.
Main benefits of Small Pots Payment?
Does not trigger MPAA.
Was never tested against the MPAA.
Primary Protection?
DB value?
Can still contribute?
Deadline for application?
Protects against LTA if >£1.5m in 2006 (Allows 25% £1.5m)
20:1 (Though 25:1 if in payment)
Yes
2009
Primary Protection Factor? Calculated how?
% by which benefits exceed £1.5m.
(2006 Pension - £1.5m)/£1.5m
How to work out Primary Protection amount?
PPF x Underpinned LTA (£1.8m)
Enhanced Protection?
Ongoing PCs?
Deadline?
No min on A day.
No further PCs.
25% of £1.5m
2009
BEST TYPE
Types of protection?
Fixed x3
Individual x2
Primary
Enhanced
Scheme Specific
Scheme Specific LS Protection?
> 25% LS Rights on A Day, automatically protected.
Lost if transferred (Unless block).
Lost if does partial crystallisation.
Primary /Enhanced+ LS Protection?
Expressed as?
LS Rights on A Day >£375k
and
Primary: Monetary Amount
Enhanced: %
Fixed Protections?
Ongoing PCs?
Deadlines?
No ongoing PCs.
FP12: £1.8m - 2012
FP14: £1.5m - 2014
FP16: £1.25 - None, but no further PCs
Individual Protections? Ongoing PCs?
Funds above Standard LTA on date. Protected to lower of pension savings or max level.
Yes
IP14 - Min £1.25 - Prot £1.5m - 2017
IP16 - Min £1m - Prot £1.25 - None
How does splitting/sharing affect Primary Protection?
Pension Debit subtracted from Pension. If new LTA <£1.5m, protection lost.
What is Alternative Annual Allowance?
If both DB + DC member: can pay in MPAA to DC, then up to £60k to DB accrual.
BCE:
- 1?
- 2?
- 6?
- 8?
1: Drawdown
2: Scheme
6: Lump Sum
8: Transferring Overseas
Valuation for DC BCE?
DC benefits after 06/04/06:
- Valued as fund value brought in to payment
- Drawdown for Annuity/at 75: original allocation to drawdown deducted from current cash value (Therefore only growth tested, preventing double testing)
Valuation for DB BCE?
- Prior to A day?
- Since?
x25 pension in payment
Use factor of 20 e.g. £20,000 x20 = £400,000
Valuation for BCE: Capped drawdown?
Value is 25 x 80% of Max Income
Current Pension allowances?
LSA: £268,275
LSDBA: £1,073,100 (Minus any LSA used)
OTA: 25% on benefits exceeding £1,073,100 when transferred overseas
LSA if:
- Used 100% already prior to 06/04/24?
- Used only part?
- None available to them
- LSA reduced by 25% of amount of LTA used previously (Usually £1,073,100)
LSDBA if:
- Used 100% prior to 06/04/24?
- Used only part?
- None available
- LSDBA reduced by 25% of %LTA used
Serious Ill-Health Early Retirement (SIHLS):
<75?
>75?
Tax-free up to LSDBA
Marginal Rate via PAYE
Protected Retirement Age?
If in place by A-day.
Prior to LTA Abolition - LTA reduced by 2.5%/yr before 55.
2028 protection?
If have ‘Unqualified Right’ to take benefits at 55.
What is a successor?
Nominated by dependent/nominee to continue to receive flexi-access drawdown.
Significance of time after death to designated death benefits?
Two years.
If >2yrs; benefits taxed on recipient regardless of age of member at death.
Uncrystallised DC funds on death:
- <75, within 2yr window?
- >75/Outside 2yrs?
Tax free. LS tested against LSDBA. XS at marginal rate.
At marginate rate.
DB death benefits?
LS: Tax-free up to LSDBA. XS at MR.
Income: Guarantee Period/Dependant’s pension. Taxed at MR.
DC Crystallised death benefits?
1. Lifetime Annuity?
2. Drawdown?
Tax Rx?
- Guarantee Period, APLS, Survivors regardless of age
- Nominee/Successor takes as LS/Annuity/FAD
<75: LS against LSDBA, XS at MR. Income tax free.
>75: LS/Income at MR
Transitional Tax-Free Amount Certificate (TTFAC) requirements?
Before first RBCE after 06/04/24.
If can evidence previously taken LSs.
Scheme has 3 mths to provide/decline.
Charges?
1. Unauthorised Payment Charge?
2. Unauthorised Payment Surcharge?
3. Scheme Sanction Charge?
4. Deregistration Charge?
- 40% of unauthorised payment
- Additional 15% if unauthorised payments exceed 25% fund value
- Around 15% of unauthorised payments scheme sanction charge
- 40% if loses registered status
Overseas schemes rules?
Flexibly access RNUKS; MPAA triggered.
UFPLS equivalents; taxed as income.
Limit of £100k covering payments from registered/overseas schemes.
25% Overseas transfer tax to any QROPS transfer
Lump Sum Allowance is?
£268,275 - Prev L.S.s taken
LSDBA is?
£1,073,100 - Previous Lump sums taken
How do you calculate TFC allowance?
If taken benefits before 06/04/24?
25% of LTA, or, Protected LTA.
‘Standard’: LSA - (25% x %prev LTA Used x current LTA)
TTFAC: LSA - Prev TFC
Since 2017, any pension received whilst Non-Resident for period of >10yrs will be taxed on return if?
Relevant Withrawals >£100k
Overseas Transfer Allowance is?
Same as LSA/LSDBA. benefits in XS: subject to 25% tax.
If scheme pension paid to <12 members what happens?
MPAA triggered.
DB PCLS must be taken when?
6mths pre- to 12mths post- income starting.
Scheme Pension rules?
At least annually.
Guarantee Period <10yrs.
Cannot decrease, unless limited circumstances
DB scheme death benefits?
Dependents SP
Guarantee Period
LS’s:
-DBLS: Multiple of Salary
- Pension Protection LS: Difference between value/income
-Annuity Protection LS: Fund value toward annuity protection - income (LSDBA tested)
What is an ‘Open Market Option’?
What affects annuity rates?
Ability to shop around for the best annuity rate.
GILT yields and Mortality
Shorter than average life expectancy annuities?
Enhanced - Lifestyle factors accounted for
Impaired - Health Conditions
