Chapter 2 & 3 Flashcards
Which scheme operate net pay and how does this work
Silly name as taken from gross pay
Usually DB/Occ, Not GPP,
Employee conts taken from employee gross pay BEFORE tax deducted saves income tax at marginal rate.
Does matter what tax band as same method.
Which scheme operate Relief at Source and how does this work
Source - Stake
DB, Personal, Stakeholder, GPP
Provider claims basic rate tax relief
Which scheme operate Relief on Making a Claim and how does this work
RAC
All tax relief as self assessment
What is adjusted net income
Total income from all sources less certain deductions i.e. personal pension cont
When is self employed tax relief paid
1 - on a/c 31st Jan current year i.e. 2022 - 50% of 2021/22 liability
2. 31st July following end of tax year i.e. 2022 - 50% of 2021/22 liability
3. 31st Jan 2023 following end of tax year (for 2021/22) - difference between tax liability & two payments made. ALSO tax relief for current tax year received.
What are the requirements for recycling PCLS
If ALL apply
PCLS & any other from 12 months exceeds £7500
Significant increase - more than 30% of expected
Cumulative sum excess 30% of PCLS
Would cause entire PCLS to be unauthorised
What is the AA tax charge
if over PIP (tax year) then taxed at marginal rate tax i.e. basic, higher or additional
How is DC input calculated
conts paid by the member or someone else before 75
NOT conts by member after 75 and any investment income/return
How do you calculate the DB input at opening & closing of PIP
Open values times by 16 and revalue by CPI
Closing times by 16 NO CPI
How is threshold income calculated
£200k - Threshold before adjusting (TA)
Take gross taxable income (inc Divi’s)
MINUS gross member pension conts
PLUS salary exchange
MINUS lump sum death benefits.
If over then do Adjusted
How is adjusted income calculated?
Take gross taxable income (inc Divi’s)
PLUS employer pension conts
MINUS lump sum death benefits.
If over £240k then reduce £1 for every £2 over, if less then no taper
How does carry forward work within own business
Up to £40k per tax year - not salary
Would only get tax relief up to % of salary
What happens when the MPAA is triggered
Applies from following day of trigger and for ALL other tax years
What is not a trigger for MPAA
If designate for drawdown & only take PCLS
UFPLS IS a Trigger
How do you calculate an excess of LTA
There is a limit of 25% of available LTA TFC, minus this (if applicable) then work out any excess.
If cry then no TFC
How is a scheme pension valued for LTA
Income x20
How is a drawdown at age 75 valued for LTA
market value at 75 minus market value when designated
How is a Transfer overseas value valued for LTA
Use the transfer value and IGNORE any preserved pension
What is not a BCE
If tsfr from PP to ISPP
or if take benefits from RAC
If a member has previously drawn benefits after A-day how are these valued for BCE
Calculate percentage of LTA for previous BCE, ROUND down, PCLS gets added seperately
Sophie’s capped drawdown pension commenced in 2005 and is still a capped drawdown pension when she crystallises further benefits in 2022/23. For lifetime allowance purposes, her pension will be valued as the:
25 x 80% of max annual amount at date of BCE
When may an individual be entitled to higher LTA
if not UK resident
Tsfr from overseas
Pre 06/04/2006 pension credit/share
After 06/04/2006 pension credit already in payment (started on/after 06/04/2006)
Primary Protection
Fixed 2012/2014/2016
NOT ENHANCED protection - as not higher LTA - instead based on value
From 2028 what will the Normal Retirement Age change to (Not state pension age)
Due to change from 55 to 57
What are the requirements if a client has a protected retirement age
Scheme must be taken in full
Reduced LTA - 2.5% by every COMPLETE year taken before NRA
