Pensions

Question 1

Occupational pension scheme

Answer 1

Pension scheme run by an employer / group of employers for employees

Question 2

Earnings related occupational pension schemes are

Answer 2

Defined benefit schemes - level of compulsory contributions fixed by employer

Question 3

Investment related occupational pension scheme

Answer 3

Money purchase schemes

Question 4

Personal pension scheme

Answer 4

Pension scheme run by financial institution (e.g. insurance company or bank)

Question 5

Pensions schemes registered with HMRC are…

Answer 5

Not liable to tax on income/gains

Question 6

Employees and pension schemes

Answer 6

• Can be member of occupational and personal
• Can make own contributions, employer also contributes
• Occupational schemes may be defined benefit or money purchase

Question 7

Self employed and pension schemes

Answer 7

• Can only be member of personal pension scheme
• Can make own contributions
• Personal pension schemes are usually only money purchase, so pension depends on growth in underlying investments

Question 8

Who can make contributions to a pension scheme which attract tax relief

Answer 8

Individual, active member of pension scheme registered with HMRC under the age of 75

Question 9

Active member of pension scheme defintiion

Answer 9

Individual for whom there are presently arrangements being made (contributions) under pension scheme for accrual of benefits to that person or ink espect of them

Question 10

Annual limit of contributions for tax relief

Answer 10

Higher of:
- individuals relevant earnings chargeable to income tax in the year
- the basic amount (£3,600)

Question 11

Relevant earnings for considering annual limit

Answer 11

Employment income and trading income

Question 12

Pensions - tax relief at source - personal - basic rate

Answer 12

Contributions deemed to be made net of basic tax, individual can pay 80%, HMRC pays equivalent amount of basic rate tax to pension profivder

Question 13

Pensions - tax relief at source - personal - higher and additional rate

Answer 13

Basic rate and higher rate limit increased by gross amount of contributions they are entitled to relief

Question 14

Tax relief given under net pay arrangements - occupational

Answer 14

Employer deducts gross pension contributions from employment income before operating PAYE. No claim required

Question 15

Contributions by employer…

Answer 15

no limit but count towards annual allowance and affect value of fund for lifetime allowance.

Question 16

How to employers obtain tax relief for contributions

Answer 16

Deducting as expense in calculating trading profit - always made gross

Question 17

pensions - Annual allowance definition

Answer 17

overriding limit for total pension input into the active members pension fund each tax year

Question 18

Minimum age to receive pension benefits on occupational or personal pension scheme

Answer 18

55

Question 19

Drawing tax free lump sum

Answer 19

Usually 25% of their pension fund as tax-free lump sums subject to maximum of 25% of lifetime allowance
no maximum age

Question 20

Taxing pension income

Answer 20

Assume included in NSI

Question 21

Lifetime allowance for pension

Answer 21

1,073,100
Additional tax consequences as draw benefit