1.1) State pensions are funded on a ‘pay as you go basis’ what does this mean?
‘Pay as you go’ means that the National Insurance contributions of the current working population pay for today’s pensioners’ State Pensions.
1.) As well as life expectancy, annuity rates are based on returns of which type of underlying investment ?
Expected returns from gilts.
Outline four taxation incentives of making pension contributions ?
- income tax relief on contributions made by individuals;
- contributions made by employers are treated as a business expense for corporation tax or income tax purposes;
- the investment profits of the fund are exempt from income tax and capital gains tax; and
- the ability to take part of the proceeds as a tax-free cash lump sum, known as the pension commencement lump sum.