later life pension contributions Flashcards
(20 cards)
Adjusted Net Income
Grossed Income from all sources less deductions such as charity payments and personal pension contributions.
Net Pay Method
tax relief is given at the members highest marginal rate from gross pay.
Recycling pension lump sum
Not allowed if meets all 6 conditions-
Why Salary sacrifice
To take advantage of favourable tax/NI treatment on certain benefits
Salary sacrifice options
Bonuses/commissions
when did Annual Allowances come into effect?
6th April 2006
What is a Pension Input Period?
Pension input value is compared to the annual allowance that applies to the tax year in which the PIP ends. If it exceeds then there is a tax charge.
What is the total pension input amount?
Total made during the PIP that will be assessed against the corresponding tax year allowance (annual allowance year at the PIP end).
what is the Total pension input amount for money purchase schemes?
total gross amount of premiums paid in to the scheme- member and employer contributions- excludes contributions in last tax year where member died or benefits taken as a result of ill health
What is the annual allowance charge? (AAC)
If the total pension paid exceeds the annual allowance a tax charge is paid. This is done by adding the excess to the adjusted net income to calculate the tax payable.-either 20/40 or 45%.
How is the AAC paid?
via self assessment
when was the Annual Allowance aligned with the tax year?
8 July 2015
when did the MPAA change to £4000?
6 April 2017 or 2017/18 tax year
what is the pension tapered allowance?
Those earning more than £150,000 will lose £1 of their annual allowance per £2 earned down to a minimum of £10k. therefore those on £210,000 will have an allowance of £10k
Pre-alignment tax year- what is it?
2 PIP periods for tax year 2015-16. one from 6th April to 8 July and the other which was called the post alignment from 9th July to 5 April 2016. Each period had an annual allowance of £40k each.
How does the MPAA work?
once the member has accessed their pension flexibly they will have an allowance of £4k for that and all subsequent tax years.
what is the alternative annual allowance?
defined benefit schemes reduced from £40 to £36k. In addition for HRT payers subject to tapering meaning it could be as low as £6k.
What is carry forward?
/ability to carry forward unused allowances of £40k for previous tax years. From 2019/20 tapering rules also apply.Also must current tax years allowance first.
what are the rules for the tapered annual allowance?
Net income must be more than £110k and adjusted income more than £150k.
Gross income- pay plus divis plus interest less professional fees, qualifring loan interest and net pay contributions to pension.
Adjusted income-net income plus net contributions to pension plus employer contributions
what are MPAA trigger events?
came into force in April 2015.
taking an income from a flexi-access drawdown fund
UFPLS
intention to convert a pre 6 april 2015 capped drawdown to flexi drawdown and then takes an income
takes more than the maximum from a capped drawdown pre 6 april 2015 fund.
takes a tax free lump sum of more than £375,000 where there is primary protection.
payment from a lifetime annuity where the payments can be decreased other than permitted circumstances.
receiving a scheme pension payment with less than 12 members
payments as above from a foreign pension scheme.
IF TAKEN BY NOMINEE, SUCCESSOR OR DEPENDENT THIS IS NOT TRIGGERED.
