Topic 8 Flashcards
To benefit from range of tax adv, what must a scheme do
Register scheme with hmrc
The pensions act 2006 attempted what?
To bring all under one simplified set of rules
What are the limit of pa pension conts
Higher of:
100% of uk earning
£3600
To max of £50k-combined bet emp and employer
Eg earn 35k, out in 35k, emp can out in 15k w/o income taxed
Taking benefits froma pension scheme is known as ….
Crystallisation
Lifetime allowance limit is?
£1.5m
25% charges to excess funds used to provide income
55% if taken as cash
What is a pension fund w/d?
Alternative to purchasing annuity
Drawdown- income w/d from fund within limits, officially called an unsecured pension- still taxed
Allows holder to take tax free lump sum, then delay taking an income by setting dd at 0%
On a unsecured pension, how much can be withdrawn?
Bet 0 and 100% of GAD rate -gov actuaries dept
This is capped drawdown which applies to most
What is the GAD rate?
Gov actuaries dept rate, broadly the income a level anniuty would have provided for same age and sex
Reviewed every 3rd anniv, but holder can change w/d within limits at any time
What is secured pension income defined as?
State pensions, occ scheme or pension annuities
What is flex drawdown?
If secure ret income at least £20k can take any amount anytime
Each w/d treated as income and taxed accordingly
If planholder dies b4 75 and crystal…
Fund passes to beneficiaries free from IHT
If holder dies after 75 but not crystalised benefits…
A recovery charge of 55% applies
Not IHT, prevent building up pension without intention of taking benefits to escape tax
If holder dies while taking unsecured income….
the fund can be returned to beneficiaries less 55% recover charge
Or fund can provide income for deps- fund wouldnt be taxed
Accrual rate
This is the rate at which you build up pension benefits while a member of a defined benefit scheme
Ie 1/60th
With profits?
Min maturity guaranteed
Bonuses are added assuming profits are sufficient
Unit links
Prems inv in chosen fund
Dep account
No risk but growth is unlikey to compare to with profits or unit linked
Stakeholder pension standards are?
Charges cant exceed 1% pa of fund value, or if started after april 05 1.5% for ten yrs then 1%
Min contribution cant exceed 20
Can be stopped and started with charge
Default inv option
Facilty to move to low risk as retirement approaches
Who must make sh pensions availabe?
Emp with 5+ people unless they have occ scheme or pers pension scheme which they pay 3% min into
Who doesnt have to be offered chance to join?
Under18
Below nic lower earning
Emp less than 3 mths
Self inv pers pension- sipp
Ind pers pension but wider choice of inv
Incl property or business
Group personal pension…
Each emp joins own plan with the scheme
They have full control
But emp collects and pays prems
Employer can set conditions for membership
NEST
National employment savins trust
Result of pension act 2008
Most employers will have to join
Auto enrollment- although can opt out
State pension- date equalises for m and w?
67
68
2020
2034-36
2046
State pension- how much married couples get?
- 90-(107.45x2)
- 45 + whatever spouse qual for if 60% or more
- 85 if spouse qual for under 60%
State pension qualifying yrs?
Was 90% of working lifes min 25%
From april 11 - 30 years
1/30th for each qual yr
State pension will inc annually by….
Greater of:
Annual Inc in earnings
CPI b4 4/11 was RPI which gen higher
2.5%
S2P?
Replaced serps in 2002
Only emp people class 1 nic
Higher level of benefit
Better for low earners - proportionately
Serps?
1978-2002 Replaced graduated pension scheme Class 1 nic only Band earnings Max 25% till 2000 Then reduced to 20%
Graduated pension
1961-75
V small top up to state
Pension credit
Over 60s- Ensures min income if 142.70 for single
And 217.90 for couples
Savings credit pays small amount for those with income above certain limits- over 65
% live to pension age?
90
Personal pension benefit can be taken from age..
55
