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F6 Taxation > 10 Pensions > Flashcards

Flashcards in 10 Pensions Deck (29)
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1
Q

What are two different types of pension schemes?

A

Occupational and personal

2
Q

What are the two different types of occupational pension scheme?

A

Defined benefit scheme and money purchase scheme

3
Q

What is a defined benefit scheme?

A

The benefits obtained on retirement are linked to the level of earnings of the employee.

4
Q

What is a money purchase scheme (or ‘defined contribution’ scheme)?

A

The benefits obtained depend upon the performance of the investments held by the pension fund.

5
Q

Who may personal pension scheme contributions may be made by?

A

Individual and any third party i.e. employer, spouse, parent ect

6
Q

When is pension tax relief available?

A

When the scheme is a registered scheme and the individual is a UK resident under 75 years old

7
Q

What is the tax relief maximum annual amount?

A

Higher of £3,600 or 100% of the individuals relevant earnings

8
Q

What is tax relief available on?

A

Lower of gross pension contributions and maximum annual amount

9
Q

What does relevant earnings include?

A

Taxable trading profits, employment income and profits from furnished holiday lettings but not investment income.

10
Q

What can an individual with no relevant earnings claim up to?

A

£3,600 PA

11
Q

When does an employer deduct pension contributions for an occupational pension scheme?

A

Before tax

12
Q

What are payments made into a pension scheme made by employers?

A
  1. Tax deductible
  2. Exempt employment benefit for the employee
  3. Added to the pension contributions paid by the employee to reach the annual maxiumum
13
Q

How is the deduction recorded in the employers profit and loss?

A

Add back any amount charged and deduct the amount paid. This is recorded the amount paid.

14
Q

What is the annual allowance?

A

£40,000 for the last three years

15
Q

What can you do with the annual allowance?

A

Bring forward unused allowance

16
Q

What years was the annual allowance £40,000?

A

1415, 1516, 1617

17
Q

What years was the annual allowance £40,000?

A

1314

18
Q

How is the annual allowance calculated in relation to more than one year?

A

FIFO

19
Q

How is the tax charge calculated when the annual allowance is exceeded?

A

The tax charge is calculated as if the excess is the individual’s top slice of income (i.e. taxed last after all sources of income, including dividends) at non-savings rates.

20
Q

How is the annual allowance tax charge taken?

A

Through self-assessment or through the pension scheme

21
Q

How is the annual allowance reduced for high-income individuals?

A

Adjusted income - £150,000 x 50%

22
Q

What is the limit to which annual allowance can be reduced to?

A

Only can be reduced to is £10,000

23
Q

Under what circumstances do you reduce the annual allowance?

A

The restriction applies to individuals with ‘adjusted income’ exceeding £150,000.

24
Q

How is the adjusted income calculated for the reduction in annual allowance?

A

Net income + Occupational pension scheme contributions for employee and any scheme employer contributions

25
Q

What is the lifetime allowance?

A

£1 million 2016/17

26
Q

What is the minimum age for accessing your pension fund?

A

55

27
Q

In a money purchase scheme how much can an individual take tax free?

A

25%

28
Q

When does lifetime allowance apply?

A

When the individual becomes entitled to take benefits out the scheme

29
Q

When does the tax charge on the lifetime allowance apply?

A

If the value of the pension fund at that time exceeds the lifetime allowance a tax charge applies