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R04 - 2023/24 > Single Answer Questions > Flashcards

Single Answer Questions Flashcards

1
Q

What is FRS17?

A

A set of accounting rules which require companies to report pension deficits and surpluses in the year that the deficit/surplus occurred.

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2
Q

Which Act of Parliament set up greater protection and compensation schemes for members of occupational pension schemes?

A

Pensions Act 1995

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3
Q

Which Act of Parliament introduced the Pension Protection Fund (PPF)?

A

Pensions Act 2004

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4
Q

What is State Pension Credit?

A

A means tested benefit that tops up the income of the poorest pensioners.

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5
Q

When was a single pension tax regime introduced and what was the name of that day?

A

6th April 2006
A-Day

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6
Q

For whom was the State Second Pension available?

A

Available to certain low earners, and individuals receiving certain State Benefits such as Carer’s allowance.

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7
Q

Since 2016’s introduction of a single pension regime, how many years of NI contributions are required for the State Pension?

A

35 years.

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8
Q

In which year will the State Pension age for men and women be 67?

A

2028

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9
Q

How often will the State Pension age be reviewed?

A

At least once each Parliament.

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10
Q

A relevant UK individual must be less than what age?

A

Less than 75.

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11
Q

For a non earner, what is the maximum pension contribution which is eligible for tax relief?

A

£3,600

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12
Q

Does a pension contribution by an employer reduce NICs liability?

A

No, NICs is calculated on gross pay, so a pension contribution does not reduce the NICs liability.

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13
Q

What are the two methods by which employer sponsored occupational pensions are awarded tax relief?

A

The net pay method (whereby the pension contribution is made before income tax is calculated).

The relief at source method (the pension provided reclaims 20% at source, and the employee must reclaim any higher or additional rate tax via self-assessment).

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14
Q

What are the benefits of salary sacrifice?

A

There is a NICs saving for both the employer and employee (as the contribution is not regarded as earnings). Therefore, the overall benefit to the employee (pension and salary) may be higher, despite gross salary being lower.

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15
Q

How much is the annual allowance?

A

£60,000

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16
Q

How much is the Money Purchase Annual Allowance (MPAA)?

A

£10,000

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17
Q

When does the Pension Input Period (PIP) run?

A

6th April to 5th April (same as the tax year).

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18
Q

What factor is used to calculate the increase in member benefits of a DB scheme when considering the annual allowance?

A

16.

In addition to the increase in value of the annual benefits, the increase in PCLS is added to the increase (I.e. 16 x annual increase plus increase in PCLS).

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19
Q

For how many years can unused annual allowance be carried forward?

A

Three years.

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20
Q

How much annual allowance can be carried forward from previous years?

A

Any unused allowance can be carried forward, only relevant UK earnings on the current year matters.

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21
Q

Can unused Money Purchase Annual Allowance (MPAA) be carried forward?

A

No.

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22
Q

How much is the alternative annual allowance?

A

£50,000.

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23
Q

How much is the minimum annual allowance charge that a pension scheme must pay on behalf of the scheme member?

A

£2,000.

Amounts due less than this are at the discretion of the scheme administrator.

24
Q

How much is the maximum pension commencement lump sum (PCLS)?

A

£268,275

25% of the current life time allowance (£1,073,100).

25
Q

Before 2023/24 what were the tax charges for income and lump sums in excess of the lifetime allowance?

A

25% for income.

55% for lump sums.

26
Q

What is 2028 protection?

A

Protection so that people who had a right in their schemes to take their pensions before the minimum normal pension age can maintain this benefit.

27
Q

Early payment of benefits on ill health grounds can only be given as a lump sum in what condition?

A

The scheme member has less than a year to live.

28
Q

Pre 6th April 2006 rights to take benefits before normal pension age:

Members have a reduced lifetime allowance - how is this calculated?

A

2.5% reduction for every complete year the benefit is taken before normal minimum pension age.

29
Q

What is the difference between UFPLUS payments for people going over the lifetime allowance pre and post 75?

A

Only an UFPLUS up to the LTA can be taken pre-75.

Post 75, the whole amount can be taken as UFPLUS but benefits above the LTA will be taxed at the marginal rate.

30
Q

What’s the treatment of small pots payments:

A

Not tested against the LTA.
Does not trigger the MPAA.

31
Q

What is primary protection?

A

Primary protection could be used by individuals who had aggregate pension savings in excess of £1.5m prior to A-day.

It allows the factor (value of pre a day benefits/£1.5m) to calculate the individuals personal lifetime allowance.

32
Q

What is enhanced protection?

A

Enhanced protection was available to everyone with pre A-day benefits regardless of the value. It keeps the benefits as they were pre A-day provided that there is no further accrual into the pension scheme.

33
Q

What is fixed protection 2012?

A

When the LTA dropped in 2012 it allowed an individual’s benefits to be protected up to £1.8m, thus allowing a PCLS up to 25% of £1.8m.

There must have been no benefit accrual post A-day until 6th April 2023 when benefit accrual may recommence.

Anyone who applied for primary or enhanced protection could not apply for fixed protection.

34
Q

What is fixed protection 2014 and 2016?

A

The same as FP2012 however the benefits are guaranteed up to £1.5m for 2014 and £1.25m for 2016.

35
Q

What is individual protection?

A

Individual protection was aimed at people in 2014 without primary protection who had pensions benefits in excess of £1.25. It gave them a LTA of the maximum of their pension value on 5th April 2014 or £1.5m.

36
Q

Which act established the Pensions Regulator?

A

Pensions Act 2004

37
Q

What is a TPR Contribution Notice?

A

Issues where there is a deliberate attempt to avoid statutory debt. This notice directs the involved to pay up to the full statutory debt either to the scheme or to the board of the Pension Protection Fund (PPF).

38
Q

What is a TPR Support Direction?

A

This requires financial support to be put in place for an underfunded scheme where the Pensions Regulator concludes that the employer is either a service company or insufficiently resourced at a time chosen by TPR (the relevant time).

39
Q

How long after ‘the relevant time’ does TPR have to issue a financial support direction?

A

Two years.

40
Q

How often do employers have to automatically re-enrol all job holders who have previously opted out of their pension scheme?

A

At least every three years.

41
Q

What is ‘offsetting’ in terms of pensions in divorce?

A

The value of the pension is offset against other assets rather than the pension itself being subdivided.

42
Q

What is ‘earmarking’ in respect of pensions in divorce proceedings?

A

A portion of the pension is ‘earmarked’ for the ex-spouse, meaning there is no subdivision of the pension, merely a portion is set-aside for the ex-spouse.

43
Q

What are the two types of earmarking order?

A

Earmarked periodic payment orders: the ex-spouse takes payments (expressed as a percentage) of the member’s pension.

Earmarked lump sum orders: the ex spouse takes some, or all, of the member’s tax-free cash.

44
Q

How is income from a pension earmarking order taxed?

A

Taxed at the member’s marginal rate.

If the ex-spouse pays tax at a higher rate, they owe more.

If the ex-spouse owes tax at a lower rates then they are unable to reclaim.

45
Q

What happens to an ear-marked periodic payment order if an ex-spouse remarries?

A

Any earmarked periodic payment order no longer has any legal standing.

Earmarked lump-sums are unaffected by remarriage.

46
Q

What is the difference between earmarking and pension sharing?

A

Pension sharing awards a portion of the pension directly to the ex-spouse (and is a form of clean-break divorce), this means the ex-spouse can remarry or co-habit without any penalty.

Pension earmarking only earmarks a portion of the income or lump-sum for when the member takes it. The member can delay taking the pension, and the income portion is affected by remarriage and co-habitation.

47
Q

Which two Acts govern the trusts which administer DB schemes?

A

Pensions Act 1995
Pensions Act 2004

48
Q

How often must the employer’s funding rate of a DB scheme be reviewed?

A

At least once every three years.

49
Q

What are ‘technical provisions’ in relation to a DB scheme?

A

The amount of assets needed to cover the scheme’s future liabilities as they fall due. The scheme assets are valued at market value.

50
Q

Must the scheme auditor of a DB scheme be independent?

A

Yes - they cannot be a member of the scheme; and employee of the trustees; an employer relating to the scheme; a trustee, or; connected with the trustees

51
Q

Which Act require every pension scheme to have a scheme administrator?

A

Finance Act 2004.

52
Q

Within what timeframe can employees leave a DB scheme and have a refund?

A

Two years.

The employer isn’t obliged to refund the contributions and can instead offer a preserved pension.

53
Q

What is the tax treatment of member’s contributions which are refunded from a DB scheme?

Upon whom does this liability fall?

A

The first £20,000 is taxed at 20%.

Any excess is taxed at 50%.

The liability falls upon the scheme administrator, however this can be deducted from the member’s refund.

54
Q

In what circumstance can a cash equivalent transfer value (CETV) be reduced?

A

When the scheme is underfunded.

55
Q

How regularly are scheme members allowed to request a CETV?

A

Once every twelve months, although schemes may allow this more regularly.

R04 - 2023/24 (11 decks)

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