TOPIC 22 Flashcards
Which of the following is true of an individual savings account (ISA) mortgage?
Cash ISAs are the most sensible type of ISA for mortgages.
It is possible to arrange a joint ISA to repay a mortgage.
An ISA can be cashed in at any time to repay the mortgage.
An ISA can be cashed in at any time to repay the mortgage.
Cash ISAs offer no prospect of capital growth so are not suitable for mortgage repayment. ISAs can only be arranged on a single-life basis, although joint buyers could each arrange an ISA in their sole name.
Tim invested the full ISA allowance into unit trusts in a flexible stocks and shares ISA in July 202X and held the proceeds as cash in his ISA until September 202X, when he withdrew the cash. In November 202X he was in a position to pay the £1,000 back into his ISA. What is his position?
Tim can reinvest the £1,000 as it is permitted to reinvest cash withdrawn from an ISA.
Tim cannot reinvest the cash as he has already invested the full ISA allowance for the tax year.
Tim may be able to reinvest the £1,000 at the discretion of the ISA provider.
Tim can reinvest the £1,000 as it is permitted to reinvest cash withdrawn from an ISA.
The annual limit applies to investment made in a tax year. If the planholder sells investments (shares, unit trusts, etc) bought with the current year’s subscription and withdraws the cash, they can ‘replace’ the money later in the tax year.
Complete the following sentence. A Help to Buy ISA was available to anyone:
aged 16 or over who started the ISA before 1 December 2019, and they must claim the bonus by 1 December 2030.
aged 16 or over who started the ISA before 1 November 2019, and they must claim the bonus by 1 December 2030.
Incorrect Response
aged 18 or over who started the ISA before 1 December 2019, and they must claim the bonus by 30 December 2030.
aged 16 or over who started the ISA before 1 December 2019, and they must claim the bonus by 1 December 2030.
n order to receive a government bonus, a Help to Buy ISA investor must have saved at least:
£400.
£1,600.
£4,000.
£1,600.
The minimum bonus is £400, which means at least £1,600 must be saved, ie to receive 25% of £1,600.
The bonus on a Lifetime ISA is calculated as a percentage of contributions made before the investor’s:
50th birthday.
60th birthday.
property is purchased.
50th birthday.
For distributions from a unit trust to be treated as interest, the unit trust must have:
a fund value below £1m.
at least 60% of the fund invested in cash or fixed-interest investments.
no more than 50% of the fund invested in stocks or shares.
at least 60% of the fund invested in cash or fixed-interest investments.
Jason is 25 and a basic-rate taxpayer, and is considering buying his first property using a £100,000 pension mortgage. What is the most likely reason for this not to be a viable option?
The term of the mortgage.
The annual allowance limit.
Annuity rates.
The term of the mortgage.
Jason is 25 and can take pension benefits from the age of 57. This would mean a mortgage term of at least 32 years, which may not be justifiable or desirable. The annual allowance limit would not affect Jason’s ability to fund the pension to the required level. Pension flexibility means that Jason would not be reliant on an annuity on retirement.
Which option when taking benefits would provide the most tax-efficient way for Jason to take cash from his pension plan to pay off the mortgage?
Uncrystallised funds pension lump sum (UFPLS).
Flexi-access drawdown.
Capped drawdown.
Flexi-access drawdown.
Flexi-access drawdown would allow Jason to take up to 25% of his pension fund tax free. He could leave the balance of the fund invested but would not have to take any income, which would avoid further tax until he needed income in retirement.
UFPLS would enable Jason to take a lump sum to pay off the mortgage, but only the first 25% of the cash would be tax free, with the balance taxed as income. Capped drawdown is no longer a retirement option.
Nichelle’s annual earnings are £5,000 below the pension annual allowance and her employer is prepared to make a contribution to a personal pension. What is the maximum that Nichelle can contribute personally without facing any tax complications? An amount:
up to her earnings.
up to the annual allowance.
as much as she likes as long as her employer does not contribute.
Nichelle can make personal contributions up to her earned income without any tax implications. Her employer can contribute the balance up to the annual allowance without incurring any penalties for Nichelle.
A personal pension planholder dies at the age of 76, having not taken any benefits from his pension fund. Which of the following is true?
The fund will be subject to inheritance tax but his beneficiaries will pay no tax on any lump sums or income taken from the balance of the fund.
The fund will not be subject to inheritance tax, but his beneficiaries will pay income tax on any lump sums or income they take from the fund.
The fund will not be subject to inheritance tax and any lump sums or income his beneficiaries take from the fund will be tax free.
The fund will not be subject to inheritance tax, but his beneficiaries will pay income tax on any lump sums or income they take from the fund.
Benefits from a pension fund are not subject to inheritance tax. If the planholder dies on or after their 75th birthday, any benefits taken by their beneficiaries will be subject to income tax at their marginal rate
A couple wishing to arrange an interest‑only mortgage can arrange a joint ISA as the repayment vehicle. True or false?
True False
False. ISAs can be in single names only – but joint borrowers can have one each
An individual cannot contribute to both a cash ISA and a Help to Buy ISA in a tax year. True or false?
True False
False
In principle this is true, but if the manager offers a ‘portfolio’ ISA it may be possible to contribute to both, subject to overall cash and Help to Buy limits.
A Help to Buy ISA saver will need a minimum of £1,600 in the account to earn a bonus. True or false?
True False
True
Jason contributes to a Help to Buy ISA, paying in £1,000 as an initial deposit and £100 every month. He plans to buy a property three years later, when his grandparents have promised him a lump sum to help with the deposit. Assuming he maintains his contributions for three years, and ignoring any interest earned, how much bonus will his Help to Buy ISA give him towards his deposit?
£900.
£1,150.
£1,500.
£3,000.
£1,150.
Which of the following is true in relation to personal pensions?
Individuals can pay in to a defined‑benefit pension or a defined‑contribution pension, but not both.
An individual using flexi‑access drawdown must take the available tax‑free cash in instalments.
It is possible to take the maximum tax‑free cash and delay taking an income until later.
It is possible to take the maximum tax‑free cash and delay taking an income until later.
