Brand Set 2

Question 1

How much can pension advice cost through your employer without counting as a benefit in kind? How often can it be paid?

Answer 1

£500

Per tax year

Employer is per tax year

Question 2

When does SERPS apply?

Answer 2

1978-2002

Question 3

When does S2P apply?

Answer 3

2002-2016

Question 4

When did SGP apply?

Answer 4

1961-1978

Question 5

What is the current state pension name and when did it come into place?

Answer 5

Full New State Pension

2016

Question 6

What are the key requirements for paying pensions advice allowance?

(3)

Answer 6

Up to £500

Up to 3 times in your life

Must be paid directly to the adviser

Question 7

When does your annual allowance start to taper?

Answer 7

Adjusted net income

exceeds £240k

Question 8

Adjusted income calculation:

Answer 8

Total taxable income + employer pension contributions { - death benefits received }

(Ignore personal pension contributions)

Question 9

What is excluded from adjusted income for annual allowance tapering?

Answer 9

Personal pension contributions
Death benefits received

(employer pension contributions count)

Question 10

What is the BTS adjusted income calculation?

Answer 10

=
+ Salary
+ employer pension contributions
(Ignore) personal pension contributions
- death benefits

Question 11

What is the % charge for taking the excess of your pension over the LTA as
1. Income
2. Lump sum

Answer 11

1. 25%
2. 55%

Question 12

Which people might be entitled to a higher LTA?

Answer 12

• non-UK residents
• individuals who transferred benefits from QROPS
• divorcees

(& then those with Primary or Fixed Protection)

Question 13

Would a benefit in kind be considered within your total relevant UK earnings

Answer 13

Yes

Question 14

I take my small defined benefit pension as a lump sum

What is the name given to the lump sum?

Answer 14

Cash Equivalent Transfer Value

Must be less than £30k - I just didn’t want to put a number on the front - it makes it too recognisable

Question 15

The Trivial Commutation Rules allow…

(3)

Answer 15

Allows individuals with DB schemes

To commute the scheme to a lump sum

Without requirement to purchase an annuity

So presumably if you try to take a lump sum from your DB without this, then you are usually required to purchase an annuity with the money

Question 16

I take my defined benefit pension as a lump sum
Trivial Commutation Rules apply

How is it taxed?

Answer 16

Similar to a DC withdrawal, it’s 25% tax free and 75% is taxed at a marginal rate

Question 17

I take my defined benefit pension as a lump sum

Which rules must apply for this to be allowed without requiring an annuity purchase?

Answer 17

The Trivial Commutation Rules

Question 18

I want to take an old DB Pension I built up as a lump sum, I’m 79 and it is worth £24k. Assume this does not exceed the LTA. How would this be treated for tax purposes?

Answer 18

As if fully crystallising a DC worth the same amount:

£6k (25%) tax free

£18k (75%) taxed at my marginal rate

Question 19

What are the requirements of the Trivial Commutations Rules?

Answer 19

• Less than £30k pension value
• Over 55 y/o
• Not in excess of LTA
• Not in already in payment

Question 20

+75
Death benefit
Uncrystallised pension funds
Lump sum paid to family

What is the LTA position?
What is the income tax position?

Answer 20

No test on the LTA

Taxed at the marginal rate of the recipient

Question 21

What is the Primary Protection LTA equation?

Answer 21

( A-Day Val / £1.5m ) X £1.8m

£1.8m - the underpinned LTA - will remain like this in the equation until the SLA exceeds it

Question 22

If HMRC withdraws registration of a registered pension scheme, then what tax is applied and how is it calculated? Who pays this?

Answer 22

40% of

the funds held immediately before de-registration

Paid by scheme administrator

“A de-registration income tax charge”

Question 23

Registered pension fund is transferred to a QROPS.

What charge is levied against excess over the LTA?

Answer 23

25%

One way to think about this is that he hasn’t really taken a lump sum but HMRC want some so they charge as if he was taking it as income

Question 24

To qualify as a QROPS, the scheme must…

Bonus points if you can say what it might not specifically require

(2)

Answer 24

1. Be established in a country which has a double taxation agreement with the UK,
2. and regulated by the relevant authorities in its own country

Does not need to meet UK regulation

Question 25

What is the current total minimum level of contribution under auto-enrolment?

Answer 25

8% of qualifying earnings ## Footnote At least 3% from employer

Question 26

A Section 143 Valuation is …

Answer 26

an actuarial assessment carried out when the PPF is taking over assets of an insolvent company's pension scheme ## Footnote Determines if the scheme has sufficient assets to pay at least the PPF level of compensation

Question 27

Once an individual declares bankruptcy and a bankruptcy order is made, who will be appointed to administer their estate?

Answer 27

A trustee in bankruptcy

Question 28

Once a company goes into administration, who is appointed to deal with their assets?

Answer 28

An Administrator

Question 29

If there is no appointed executor, who is appointed to administer the estate of a deceased individual?

Answer 29

Personal Representative

Question 30

What are the Guaranteed Minimum Pension (GMP) benefits?

Answer 30

Between 1978 and 1997 Members of DB schemes did not accrue any entitlement to additional State Pension benefits (SERPS/S2P) If they were contracted out ("bought out") of the DB scheme They were entitled to the equivalent amount of benefits as if they had been accruing the additional SP benefits

Question 31

What is the escalation of GMP benefits and how is it funded?

Answer 31

It is fully inflation proofed Pain entirely by the state

Question 32

What is the main reason an employer might decide to provide death in service benefits through a separate insured scheme as opposed to through a DB scheme?

Answer 32

To ensure the DIS benefits do not drain the DB fund

Question 33

The International Accounting Standards 19 requires that a DB scheme's surplus or deficit must be shown on the company...

Answer 33

balance sheet ## Footnote and the present value of past service liabilities should reflect high quality bond yields, rather than equity yields.

Question 34

What is pension "Increase Exchange"?

Answer 34

The option of giving up future guaranteed increases to your pension in return for a higher initial pension with no future increases.

Question 35

A PPF Section 179 valuation is to establish the...

Answer 35

Level of a DB scheme's assets and liabilities ## Footnote This is usecd to determine any scheme underfunding which is then used to determine the level of the scheme's PPF levy

Question 36

If you are in serious ill health, you may have your pension fund commuted for a lump sum. If your pension fund was in excess of the LTA, and you were under the age of 75, how would the full lump sum be taxed?

Answer 36

Tax free up to LTA 55% thereafter

Question 37

If I contribute to my pension term assurance, how are the premiums treated for tax purposes?

Answer 37

There is no tax relief ## Footnote Following December 2006

Question 38

If my employer contributes to my pension term assurance, how are the premiums treated for tax purposes?

Answer 38

There is tax relief as it is treated as a business expense

Question 39

After what length of employment must a company offer a preserved benefit? ## Footnote What is a preserved benefit?

Answer 39

30 days ## Footnote The value of the fund built up from employee **and employer** contributions You can convert this to retirement benefits when you reach 55

Question 40

If I was being paid benefits from a group IP policy through my employer, how does this impact my annual allowance for contributions?

Answer 40

Group IP benefits are considered taxable, relevant, UK earnings So the contributions are calculated based on that being your income

Question 41

Name the three features of targeted Money Purchase schemes

Answer 41

- regarded as a DB / DC **hybrid** - it will incorporate **regular reviews** to monitor the intended benefit levels - the only **promise** is the benefit from the DC scheme ## Footnote May be worth looking into these

Question 42

How do targetted money purchase schemes work?

Answer 42

They have a targeted benefit level An actuary regularly determines the contributions required If "the fund" falls short of the required amount it may be topped up by the employer (*however nothing is promised*) ## Footnote Targeted benefit level could be a proportion of the final salary - hence the DB/DC combo

Question 43

Who else can receive the lump sum benefit from trivial commutation?

Answer 43

Dependants or nominees

Question 44

My husband just died. He worked for a company for a brief period 20 years ago. If possible, I would like to take his DB pension as a lump sum. What are the rules on this?

Answer 44

- The value must be less than £30,000 - You must be a dependant or nominee | Trivial commutation ## Footnote Can't be to a successor (the nominee of a nominee)

Question 45

Name as many circumstances as possible in which the payments from a scheme pension be reduced.

Answer 45

There are 9 - Pension sharing order (1) - Scheme pays an annual allowance charge for the member (1) - Being paid on ill health or until SPA (2) - Legal/funding issues (5) ## Footnote Not because of performance of with-profits funds or investments Think of DB as being guaranteed against poor performance, not against all situations

Question 46

What are the HMRC requirements for Lifetime Annuities? ## Footnote (3)

Answer 46

- Payable for life - Paid at least once per year in arrears - Cannot be assigned/surrendered

Question 47

My annuity payment was calculated using an automated points system based on my lifestyle. What type of annuity have I purchased? ## Footnote (1)

Answer 47

An Enhanced Annuity

Question 48

I've purchased an enhanced annuity. How is the payment calculated? ## Footnote (2)

Answer 48

Via a points system based on lifestyle.

Question 49

I am retiring in 2015. How many qualifying years do I need to be eligible for the full basic state pension? ## Footnote Bonus points if you know what years are relevant

Answer 49

30 years ## Footnote This is between 2010 and 2016 2016 being the year they switched to new state pension

Question 50

I'm retiring in 2018. How many qualifying years do I need to be eligible for the full basic state pension? ## Footnote Bonus points if you know what years are relevant

Answer 50

35 years ## Footnote From 2016

Question 51

I'm self-employed. Which NICs do I pay?

Answer 51

Class 2 and 4

Question 52

I have 5 employees in 2022. Which NICs will I pay?

Answer 52

Secondary Class 1

Question 53

I've reached SPA in 2022/23. I'm not ready to retire though, and would like to defer my State Pension. What are the rules on this? ## Footnote (3) Brand 2 Q38

Answer 53

- Must be deferred by a minimum of 9 weeks - Can only defer once - Must be taken as an income ## Footnote Brand 2 Q38

Question 54

I'm 69 years old and in receipt of my State Pension benefits. I'm moving abroad and want to understand how this will impact my payments. Do I continue to receive payments?

Answer 54

Yes ## Footnote Generally, although you won't be getting increases **unless** you move to a country which has a reciprocal social security agreement with the UK Brand 2 Q39

Question 55

I'm 69 years old and in receipt of my State Pension benefits. I'm moving abroad and want to understand how this will impact my payments. Will my payments continue to increase?

Answer 55

Yes if you move to a country which has a reciprocal social security agreement with the UK ## Footnote Brand 2 Q39

Question 56

I own a lifestyle fund. "The switching to low risk securities occurs at pre set times and does not allow for market conditions" True/False?

Answer 56

True

Question 57

I have a pension from when I worked at O2 at university. It's worth very little. What is the title given to the rules surrounding the payment of this?

Answer 57

Small pots payment ## Footnote Brand set 2 Q42

Question 58

I have a pension from when I worked at O2 at university. It's worth very little. What is a small pots payment? Why bother?

Answer 58

If you have small pensions (specific rules allowing) you can take them as a lump sum which does not test against your LTA and **does not trigger the MPAA** ## Footnote Brand set 2 Q42

Question 59

What are the rules around the Small Pots Payments? ## Footnote (2)

Answer 59

- Max of 3 non-occupational pensions (unlimited occupational ones) - £10,000 limit per payment ## Footnote Can be taken from crystallised or uncrystallised payments Brand set 2 Q42

Question 60

I've been accruing DB scheme pension benefits for 25 years but die before I reach retirement. Why can't my dependant take the benefits as an annuity protection lump sum?

Answer 60

These can only be taken from schemes through a DC pension ## Footnote DB pensions have their own death benefit arrangements. Annuity protection lump sum is not one of them and only takes place with DC arrangements Brand set 2 Q43

Question 61

What is the maximum length of a short term annuity?

Answer 61

5 years ## Footnote BS.2 Q44

Question 62

I am hoping to buy a short-term annuity. It can be guaranteed. True/False?

Answer 62

True ## Footnote Can be guaranteed for up to 5 years BS2 Q.44

Question 63

I have a FAD. Can my death benefits go to: - my dependant? or, - my nominee? or, - a successor?

Answer 63

Dependant - yes Nominee - yes Successor - no ## Footnote This is called a survivor's FAD BS2 Q.45

Question 64

I have a FAD and die at age 74. What is the tax position on my beneficiary?

Answer 64

Tax free lump sum It can go as a survivor's FAD ## Footnote BS2 Q.45

Question 65

I have a FAD and die at age 76. What is the tax position on my beneficiary?

Answer 65

Taxed at beneficiary's marginal rate Can go as a survivor's FAD ## Footnote BS2 Q.45

Question 66

What is the additional stamp duty paid when purchasing a buy to let property?

Answer 66

Extra 3% ## Footnote BS2 Q.46

Question 67

What is the tax relief situation on mortgage payments?

Answer 67

You get basic rate tax relief on mortgage interest ## Footnote BS2 Q.46

Question 68

Property investments often move in a different direction to equities. True/False?

Answer 68

True ## Footnote BS2 Q.47

Question 69

I can make a loan to my employer through my SIPP. True/False?

Answer 69

False ## Footnote BS2 Q.48

Question 70

(Definition) Who does cash flow modelling help? ## Footnote (2)

Answer 70

Those who want to assess the level of income to take from their FAD Whilst maintaining sufficient funds to meet their objectives ## Footnote BS2 Q.49

Question 71

Can I reinvest my PCLS to get more tax relief? ## Footnote (2)

Answer 71

No because it will fall foul of the anti-avoidance provisions ## Footnote BS2 Q.49

Question 72

What are the anti-avoidance provisions?

Answer 72

The provisions in place to stop me from re-investing my PCLS for further tax relief ## Footnote BS2 Q.49

Question 73

My mate says that it is possible to reinvest excess pension income into your pension and get more PCLS from this. True/False?

Answer 73

True ## Footnote Added benefit is also Death benefits increasing BS2 Q.50

Question 74

My mate says that it is possible to reinvest excess pension income into your pension and get better Death Benefits than otherwise. True/False?

Answer 74

True ## Footnote Added benefit is also PCLS increasing BS2 Q.50

Question 75

What are the benefits to re-investing my excess pension income into my pension? ## Footnote (2)

Answer 75

Additional PCLS Additional Death Benefits ## Footnote BS2 Q.50