Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CeMAP Unit 1 > Topic 10 Pension Products > Flashcards

Topic 10 Pension Products Flashcards

1
Q

Other than the State Pension what are the other types of pension available to people?

A
  1. Occupational Pension
  2. Private Pension
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What age does a person need to be to qualify for tax relief on non government pension schemes

A

75 and below up to a highest marginal rate on annual contributions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

True or False

Tax relief is only available to UK residents?

A

False. A non-resident who receives UK earnings also qualifies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the name of system that stops people contributing too much into a pension scheme?

A

Annual Allowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

True or False

Unused Annual Allowances can be carried forward from the previous 3 tax years?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the tax relief for someone earning £80,000?

A

£60,000 Annual Allowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the tax relief for someone earning £40,000?

A

£40,000 as 100% of their income

But employer and employee can top up the AA if they wish

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the pension tax relief for someone who isn’t earning?

A

£3,600

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

For a higher person with income above the “Threshold” & “Adjusted” income limit what happens to their annual allowance?

A

It is tapered down £2 for every £1 over the adjusted income allowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is “Marginal Rate” of tax?

A

The highest rate of tax a person pays on their income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

If a higher rate tax payer paid £10,000 at 40% how much tax relief can they claim?

A

20% of £10,000 so £2,000 as tax relief

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What age can a person begin to take their non state-pension?

A

55 or (57 from 2028)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the Pension Commencement Lump Sum (PCLS) and how much can be taken?

A

A 25% withdrawal by a person that is tax free

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is a Defined Benefit Scheme?

A

Pension scheme in which the benefits a person will receive from their occupational pension that are specified from the outset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a Defined Contribution Scheme?

A

An agreed level of contributions are made but the income received will depend on the investments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How does Defined Benefit work for an employee in an Occupational Scheme?

A
  • Pension calculated on their final salary and the amount of time they have paid into a scheme
  • The longer the amount of time in a scheme then more income received at retirement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a Career Average Scheme in relation to a Defined Benefit Scheme of an occupational scheme?

A

Pension dependent on the employees average earnings over the period employed by a single employer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How does Defined Contribution work for an employee in an Occupational Scheme?

A
  • Agreed contributions invested for each member
  • On retirement funds are used to purchase benefits
  • Benefits is not guaranteed by employer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a Collective defined-contribution scheme (CDC)?

A
  • possible scheme
  • a mix between the two types of pensions
  • Paid for by employers & employees
  • More predictable for employer & against economic shocks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is an Additional Voluntary Contribution (AVC)?

A
  • Additional contributions to pension normally as a defined contribution
  • Admin covered by employer who claims tax relief
  • Deducted from gross salary of employee
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is a Free Standing Additional Voluntary Contributions (FSAVC)?

A
  • Employee choosing to contribute to a separate pension fund
  • Contributions are taxed
  • Tax relief claimed by pension provider
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is auto-enrolment?

A

Is where an employer must enrol a employee in a qualifying pension scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How much must an employer contribute to an auto-enrolment scheme?

A

A specified amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the employee criteria for auto-enrolment?

A
  • Not already in a pension scheme
  • Over 22
  • Under state pension age
  • Earns over £10,000
  • Works in the UK
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

At what stage can a person opt out of a pension scheme?

A

Only after they have made a member

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is the minimum percentage amount that must be contributed to an auto enrolment scheme?

A

8%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the breakdown of the employees salary paid into an auto enrolment scheme?

A
  • 3% employer contributions
  • 4% employee contributions
  • 1% tax relief
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is the Nest?

A

A trust based occupational scheme to support workplace pension provisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How can the Nest be used?

A

Either independently or alongside workplace pension

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Between what ages must the Nest be drawn?

A

Earliest 55
Latest 75

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Personal pensions are set up as defined-benefits

True or False?

A

False

They are set up as defined contribution arrangements

32
Q

Contributions to a personal pensions scheme receive tax relief at source

True or False

A

True but only at basic rate of 20%

33
Q

What is a Group Personal Pension?

A

Collection of individual person pensions administrated on behalf of an employer by an insurance company

34
Q

How are Group Personal Pensions similar to Personal Pensions?

A

The member has their own personal plan which can be moved to a different employer

35
Q

Why would an insurance company offer discounts on a Group Personal Pension?

A

As the fund is large and set up in bulk

36
Q

What is a Self-invested Personal Pension (SIPP)?

A

Person pension that enables the invest access to a wider range of investments.

E.g shares in a company

37
Q

What is the Lump Sum Allowance (LSA)?

A

The maximum a person a person can take from their pension tax free

38
Q

How much is the Lump Sum Allowance (LSA)?

A

£268,275

39
Q

What is the Lump Sum & Death Benefit Allowance (LSDBA)?

A

The maximum that can be taken from a pension fund during lifetime & death.

40
Q

How much is the Lump Sum & Death Benefit Allowance (LSDBA)?

A

£1,073,100

41
Q

How does the Lump Sum & Death Benefit Allowance (LSDBA) work?

A

It pays both lump sums a member can take while alive & in death

42
Q

What are Stakeholder pensions?

A

Personal pension aimed a lower earners

43
Q

What must a Stakeholder pension do?

A
  • Chargers must not 1.5% of the fund per year
  • Entry & Exit charges not permitted
  • low contributions of no more than £20
44
Q

The 2 main pension phases are?

A
  1. Accumulation Phase
  2. Decumulation Phase
45
Q

Is a member of a definite-benefit scheme allowed to make decisions on the investments in their pension fund?

A

No this is done by the scheme

46
Q

Is a member of a definite-contribution scheme allowed to make decisions on the investments in their pension fund?

A

They have a choice but it may be limited depending on whether is a company or a personal pension?

47
Q

If funds are not drawn from a defined contribution scheme they are referred to as?

A

Uncrystallised

48
Q

If funds begin to be drawn from a defined contribution scheme they are referred to as?

A

Crystallised

49
Q

What is an Annuity Purchase?

A

Is a purchase of a guaranteed income from a lump sum payment from a defined contribution scheme

50
Q

What is the open market option in relation to an Annuity?

A

The pension provider must inform customers they can shop around for more appropriate annuity products to suit their circumstances

51
Q

What is a Flex-Access Drawdown?

A

Drawing of a pension once the PCLS is taken and is reinvested in to another pension scheme

52
Q

What is the risk of Flex-Access Drawdown?

A

The fund value may fall after reinvestment

53
Q

What is an advantage of a Flex-Access Drawdown for a person?

A

It can be drawn down to suit the customers needs

54
Q

What is a Uncrystallised Funds Pension Lump Sum?

A

Pension funds that remain invested

55
Q

How can a customer draw down a Uncrystallised Funds Pension Lump Sum?

A

In lump sums to suit their lifestyle

56
Q

What percentage of each Uncrystallised Funds Pension Lump Sum is tax free?

A

25%

57
Q

What is Money Purchase Annual Allowance (MPAA)?

A

Is a limit to the tax relief on pension contributions once FAD & UFPLS have been crystallised

58
Q

What is the Money Purchase Annual Allowance (MPAA) limit?

A

£10,000

59
Q

What type of Defined Pension type is relevant to Money Purchase Annual Allowance (MPAA)?

A

Defined Contribution

60
Q

What was a Capped Drawdown?

A

Was a pension drawdown fund that had a cap on how much could be drawn

61
Q

What was a Flexible Drawdown?

A

A pension drawdown option that allowed unlimited pension withdrawals

62
Q

Who were Capped and Flexible drawdowns available to?

A

Anybody who retired before 6th April 2015

63
Q

What can pension schemes offer when a member of a pension scheme dies?

A

Death Benefits

64
Q

What is a death in service?

A

A lump sum benefit that is payable if a person dies before retirement

65
Q

A death in service benefit is available to which type of occupational pension scheme?

A

Defined-benefit Scheme

66
Q

If a member of a defined benefit scheme dies after retirement what can the pension still do?

A
  • Pay the pension for guaranteed period
  • Pay spouses pension as proportion to that being paid to the member
67
Q

On a defined contribution scheme’s Crystallisation what can death benefits provide?

A
  • An income
  • Lump Sum Benefits
68
Q

What are these related to?

  • Continuing Scheme Pension
  • Lifetime Annuity for a period
  • Annuity Lump Sum Payment
  • Continuing drawdown income
A

Death benefits of a defined-contributions scheme for a member’s spouse for death post retirement

69
Q

Public Sector Schemes are unfunded by the government.

True or False

A

True pension benefits provided by government funds

70
Q

How do criminals try to scam pension funds

A
  • May offer a customer to drawdown whole pension funds tax free
  • Offer investment returns that seem too good to be true
71
Q

What is a Pension Dashboard

A

A proposed government scheme that will enable people to see details of all their uncrystallised funds and values of the pension pot

72
Q

For a higher or additional rate tax payer how would they pay tax on contributions above the 20% basic rate?

A

They would pay tax on income in higher or additional band and claim back this amount as tax relief

73
Q

Are Annuity still invested once purchased?

A

No they are no longer invested, so the fund will not grow

74
Q

What is “direct pay”?

A

Is where an employee passes an employee’s pension contributions to the pension provider

75
Q

Is an employer able to contribute to the annual allowance of an employee?

A

Yes if someone earns £50K the employer can add an additional £10K to take them to the limit of AA

76
Q

Why did Stakeholder pensions fail?

A

The restrictions on charges meant that advisers found it difficult to give advice

CeMAP Unit 1 (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions