Pensions (3) Flashcards
What is a reduced annual allowance?
Individuals who have adjusted income in excess of £240000
What is the minimum annual allowance?
£4000
Where does the minimum annual allowance apply?
Where individual has adjsuted income of £312000 or more
How is individual allowance reduced?
By £1 for every £2 that the individual’s adjusted income exceeds £240000
What is adjusted net income?
Net income + employee contributions to occupational pension schemes + employer contributions to any pension schemes for the employee
What is case for self-employed people and tapering the annual allowance?
Adjusted income is simply their net income for the tax year
What is the case for individuals with personal pensions?
have complete flexibility as to how they can access their pension fund once they reach minimum pension age of 55
What is a tax-free lump sum?
25% of the pension fund can be withdrawn
Why reinvest the balance of the pension fund?
To be reinvested to provide taxable pension income whenever the individual wishes
How are withdrawals on a pension fund taxed?
On non-savings income in the taxy years of withdrawal and subject to the normal rates of tax
What is the lifetime allowance?
£1073100
What does the lifetime allowance apply to?
Total value of a person’s pension schemes when they start to make withdrawals from the schemes
If pension fund exceeds the lifetime allowance?
Gives rise to an income tax charge on excess value of fund when individual receives pension benefits from the fund
When is rate of charge 55% if pension fund exceeds lifetime allowance
If excess value is taken as a lump sum
When is rate of charge 25% if pension fund exceeds lifetime allowance
If funds are used to provide a pension income
