Revision

Question 1

How does the DMO support pension funds?

Answer 1

By issuing ultra-long gilts

Question 2

What factor is applied to lifetime annuities started before A-day when calculating the amount of LTA used?

Answer 2

25:1

Question 3

What does an increase in bond yields do for a DB scheme’s technical provisions?

Answer 3

Decreases scheme liabilities

Question 4

In what countries are residents entitled to increases in the Singler Tier Pension?

Answer 4

UK, EEA or Switzerland

Question 5

What assumptions are made regarding longevity when it comes to critical yield calculations?

Answer 5

That longevity is constant

Question 6

In what situation is de-risking pension funds likely to be more suitable?

Answer 6

For a client that wants an annuity

Question 7

How is a death in service lump sum treated with regards to LTA on payment?

Answer 7

It is a BCE

Question 8

If recycling rules are breached, what % of the PCLS is likely to be treated as an unauthorised payment?

Answer 8

100%

Question 9

How must a QROPS be set up to avoid an unauthorised transfer tax?

Answer 9

Set up to mirror UK rules (at least initially)

Question 10

If you’re resident in a different country to your QROPS, what tax charges are you likely to face?

Answer 10

25% Overseas tax charge on the net fund value (after any LTA charge)

Question 11

How is a spouse’s scheme pension taxed on the recipient?

Answer 11

Taxed at the recipient’s highest marginal rate

Question 12

Which type of scheme is likely to be more expensive: contract-based or trust-based?

Answer 12

Trust-based

Question 13

At what rate is unauthorised payment charge levied at?

Answer 13

40%

Question 14

What effect will decreasing annuity &/or discounting rate have on a CETV?

Answer 14

The CETV will increase

Question 15

Is carer’s allowance included in the means-tested assessment for state pension credit?

Answer 15

Yes

Question 16

What is the maximum number of parts someone could have to their state pension?

Answer 16

4:
-BSP
-GRB
-SERPS
-S2P

Question 17

Amber had registered for fixed protection 2012 and has just crystallised £2.2m in the current tax year, taking the entire fund as cash. What is her total tax charge as an ART?

Answer 17

PCLS = 25% of £1.8m = £450,000
Remaining 75% taxed at 45%:
£1.35m x 45% = £607,500
Excess above LTA taxed at 55%:
£400,000 x 55% = £220,000
Total tax charge:
£607,500+£220,000=£827,500

Question 18

To which public sector workers does career average earnings NOT apply in their DB scheme?

Answer 18

Those within 10 years of their scheme’s NPA on 1/4/12.