Part 5 - Treasury Management

Question 1

What are the tasks which must be completed for setting up a pensioner payroll? (5 marks)

Answer 1

🤍 Register as an employer with HMRC and get a login for pay as you earn (PAYE) Online

🤍 Choose your payroll software to record member details, pension amounts, calculate deductions, and report to HMRC

🤍 Collect and keep records

🤍 Tell HMRC about your scheme members and

🤍 Record pension payments, make deductions and report to HMRC on or before the first payment date and every subsequent payment date thereafter

Question 2

The Trustees of their pension payroll provider must keep records of … (7 marks)

Answer 2

🤍 Different elements of pension, when they commenced and how and when they increased

🤍 Any pension review dates eg for ill health, children’s pensions or step up pensions (a step up could be required for example, where a pensioner reaches GMP payment age and the pension in payment needs to be increased to meet the GMP)

🤍 Details of the spouse/ civil partner’s benefits

🤍 Member’s bank account, address and tax details

🤍 Any continued life cover payable on early retirement

🤍 The date any guarantee period ends

🤍 The amounts of annual allowances used up by the member through relevant benefits crystallisation events (RBCE) in the scheme

Question 3

FPS

Answer 3

Full Payment Submission

Question 4

EPS

Answer 4

Employer Payment Summary

to be sent to HMRC by 19th of the following tax month where no payment was made by payroll

Question 5

HMRC will levy a penalty against a pension scheme if (3 marks)

Answer 5

🤍 the FPS was late

🤍 they did not send the expected number of FPS’s

🤍 they did not send an EPS when the scheme did not pay any members in a tax month

Question 6

Penalty for non submission of FPS/ EPS based on members

🤍 1 - 9
🤍 3 - 49
🤍 50 - 249
🤍 250 or more

Answer 6

🤍 £100
🤍 £200
🤍 £300
🤍 £400

Question 7

What is a tax code?

Answer 7

A tax code is a reference used to calculate the amount of Income (if any) to deduct from a pensioner’s pension

Question 8

Process HMRC uses to determine a pensioners tax code (3 marks)

Answer 8

🤍 Calculate all the tax allowances to which the individual is entitled

🤍 Calculate the level of income on which the tax has not been paid, and any taxable employment benefits

🤍 The tax code is based on the pensioners tax allowances, but this is reduced by the income on which the pensioner has not paid

Question 10

What is a tax code made up of?

Answer 10

🤍 Numbers - which show how much income an individual can have before they pay any tax

🤍 Letter - which shows the individual’s situation and how it affects their tax free Personal Allowance

Question 11

What is the standard personal allowance for the 2024/25 tax year?

Answer 11

£12,570

Question 12

Tax code letter:
L

Answer 12

Entitled to the standard tax-free personal allowance

Question 13

Tax code letter:
M

Answer 13

Marriage allowance and have received a transfer of 10% of their partners personal allowance

Question 14

Tax code letter:
N

Answer 14

Marriage allowance and individual has transferred 10% of their personal allowance to their partner

Question 15

Tax code letter:
S

Answer 15

Income or pension is taxed at the Scottish rate of Income Tax

Question 16

Tax code letter:
C

Answer 16

Income or pension is taxed at the Welsh rate of Income Tax

Question 17

Tax code letter:
T

Answer 17

Tax code includes other calculation to work out the individuals personal allowance

Question 18

Tax code letter:
oT

Answer 18

Either the individuals personal allowance has been used up, or they have started a new job and do not have a P45, or they did not give their new employer the details they need to provide them with a tax code

Question 19

Tax code letter:
SoT

Answer 19

For an individual living in Scotland, either there personal allowance has been used up, or they have started a new job and do not have form P45, or they did not give their new employer the details they need to provide them with a tax code

Question 20

Tax code Letter
CoT

Answer 20

For an individual living in Wales, either there personal allowance has been used up, or they have started a new job and do not have form P45, or they did not give their new employer the details they need to provide them with a tax code

Question 21

Tax Code Letter:
BR

Answer 21

All income from this pension is taxed at the basic rate of 20%. This is usually applied if an individual has got more than one job or pension

Question 22

Tax Code Letter:
SBR

Answer 22

All income from this pension is taxed at the basic rate in Scotland of 20%. This is usually applied if an individual has got more than one job or pension

Question 23

Tax Code Letter:
CBR

Answer 23

All income from this pension is taxed at the basic rate in Wales of 20%. This is usually applied if an individual has got more than one job or pension

Question 24

Tax Code Letter:
Do

Answer 24

All income from this pension is taxed at the higher rate of 40%. This is usually applied if an individual has got more than one job or pension

Question 25

Tax code Letter: SDo

Answer 25

All income from this pension is taxed at the intermediate rate in Scotland of 21%. This is usually applied if an individual has got more than one job or pension

Question 26

Tax Code Letter CDo

Answer 26

All income from this pension is taxed at the higher rate in Wales of 40%. This is usually applied if an individual has got more than one job or pension

Question 27

Tax Code Letter: D1

Answer 27

All income from this pension is taxed at the additional rate of 45%. This is usually applied if an individual has got more than one job or pension.

Question 28

Tax Code Letter: SD1

Answer 28

All income from this pension is taxed at the higher rate in Scotland of 42%. This is usually applied if an individual has got more than one job or pension.

Question 29

Tax Code Letter: SD2

Answer 29

All income from this pension is taxed at the advanced rate in Scotland of 45%. This is usually applied if an individual has got more than one job or pension.

Question 30

Tax Code Letter: SD3

Answer 30

All income from this pension is taxed at the top rate in Scotland of 48%. This is usually applied if an individual has got more than one job or pension.

Question 31

Tax Code Letter: CD1

Answer 31

All income from this pension is taxed at the additional rate in Wales of 45%. This is usually applied if an individual has got more than one job or pension.

Question 32

Tax Code Letter: NT

Answer 32

No tax is paid on the individuals pension

Question 34

What does K before a tax code mean and what circumstances would this happen?

Answer 34

The individual has income that is not being taxed another way and is worth more that their tax free Allowance 🤍 Paying tax they owe from a previous tax year through their wages or pension 🤍 Getting benefits they need to pay tax on, for example, state or company benefits

Question 35

CPI

Answer 35

Consumer Price Index

Question 36

RPI

Answer 36

Retail Price Index

Question 37

When did statutory increases to pensions change from RPI to CPI

Answer 37

1 January 2011

Question 38

What statutory increase is required on Pre 88 GMP Built up from 6 April 1978 and 5 April 1988

Answer 38

Scheme is not required to provide any increases

Question 39

What statutory increase is required on Post 88 GMP Built up from 6 April 1988 and 5 April 1997

Answer 39

Increase in line with inflation (CPI) up to a maximum of 3%

Question 40

Statutory increase on Pre 97 excess

Answer 40

No legal requirement May pay on a discretionary basis

Question 41

Statutory increase between 6 April 1997 and 5 April 2005

Answer 41

Must increase annually at increase in CPI for the 12 months ending the preceding Sept, max 5% (Except AVC pensions)

Question 42

Statutory increase for pension from 6 April 2005

Answer 42

CPI for the 12 months ending the preceding Sept, max 2.5% Possible but not compulsory for trustees to adopt this lower rate

Question 43

Which Act makes it a statutory requires for Trustees of an occupational pension scheme to open and maintain a bank account

Answer 43

Pensions Act 1995

Question 44

What activities may a bank mandate be established for?

Answer 44

🤍 Payments to beneficiaries 🩶 Transfers out of members benefits 🤍 Payment of contributions to investment managers 🩶 Payment of expenses

Question 45

When should mandates be reviewed?

Answer 45

🤍 Should be amends when any of the authorised signatories change 🩶 Following a review of the authorities, should be done annually to ensure they are still appropriate and current.

Question 46

For DB schemes contributions are …

Answer 46

… pooled and invested for the benefit of the entire membership.

Question 47

For DC schemes contributions are …

Answer 47

… invested for the benefit of an individual who has an individual account within the scheme.

Question 49

The Trustees of a DB scheme must draw up what in relation to contributions

Answer 49

A schedule of contributions

Question 50

What does a schedule of contributions/ payment schedule show

Answer 50

Shows what contributions should be paid to the scheme and when they should be paid

Question 51

The Trustees of a DC scheme must prepare, maintain and revise, what

Answer 51

A payment schedule

Question 52

What are contributions usually expressed as?

Answer 52

🤍 Fixed sum 🩶 Percentage of earnings

Question 53

If contributions are expressed as a percentage what needs to be decided?

Answer 53

Which elements of a members pay are pensionable (set out in the scheme rules)

Question 54

When do the Regulations under the Pensions Act 1995 require that the employer must pay any contributions

Answer 54

🤍 22nd of the month following the month in which the contributions are deducted from members pay, if paid electronically 🩶 19th of the following month if paid by other means