Chapter 1 - Contributing to Pensions Flashcards Preview

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Flashcards in Chapter 1 - Contributing to Pensions Deck (15):

Pension Contributions

As much as like
TR limited £3600 if no rel or 100% of RE
Under 75 for contributions
UK Res


Tax Relief

At source. Cont paid net
Employer scheme. Net pay
Employer cont. paid gross Wholly and exclusively.



Total grossed up income from all sources.
Less deductions, eg charity, trading losses.
Pension cont can reduce ANI to reduce tax.
ANI over £100k... PA lost £1 for every £2 of ANI. All lost at £122k.


PCLS Recycling

Unauthorised payment (charged) if..
All PCLS received last 12 months is over £7500
If greater than normal. 30% more
Extra conts more than 30% PCLS
If conts can be made by someone else
Recycling pre planned


Advantages of Pensions in LL

Potential TR
Possible restoration of PA
Boost retirement funds. Bigger pot
Out of estate cash
Gifting out of estate out of income.


Disadvantages in LL

Short time frame. Need medium or high ATR
No TR after age 75
Pension income means tested
Advice costs money


Pension Input Period

Run in line with tax year. Cant be changed.
Input amount is total gross for MP.
Not in year of death. Or terminal illness

For DB...increase in value of benefits with CPI and factor of 16.
Eg... if benefit increase is £5000 from £20k...
£20k x 16 = £320k
£25k x 16 = £400k
So...annual allowance input amount is £80k


Annual Allowance Charge
Annual Allowance is £40k.

If input exceeds allowance. Excess charged at persons marginal rate. If more than £2k, scheme might pay, but subject to input value being greater and pension benefits may be reduced to compensate.



Was £215k. 2010/11 reduced to £50k with 3 carry forward years. Now £40k.



£10k only once benefits been accessed.


AA - the past.

Carry forward. 3 tax years.
Must have been member of reg scheme.
Must use current year first. Then chronological order.
Does not need to have UK RE.


AA - 2015/16

Transitional. PIP now for tax year.
New PIP from 9/7/15 but closed 5/4/16 so half a year, so prev year into two halves.
So, as one off, AA was £80k for that year if member of scheme at 8/7/15. Input relevant to pre alignment year only.


Carry forward

3 years only. Max £40k less any amount used in post alignment year.


AA - the present.

AA tapered for high earners.
2 tests.
First get net income.
Adjusted Net Income Test. Has to be at least £150k to meet test. Adjusted income is NET Income plus net pay contributions plus employer input value.

Threshold Income Test. At least £110k.
This is net income plus any salary sacrificed for pension contributions less gross amount of any relief at source contributions.



Income withdrawal from drawdown.
Convert pre April 15 capped drawdown to flexi.
Takes more than permitted in capped.
Receives lump sum where primary protection exceeds £375k.
Payment from lifetime annuity
Pension from MP if less than 11 members.
From overseas funds as above.
Entering flexi drawdown pre 5/4/15.

Triggered is member only takes these. Not dependants.
MPAA there to determine is client has to 'pay back' tax relief in form of AA charge.