R04

Question 1

What are the dates to know

Answer 1

State pension age 66
Personal or workplace pension age 55
A day when lifetime allowance can into effect 2006
DB payment escalation changed from rpi to CPI 2011
Flexibility rules for pensions 2015
State pension moved from old to new scheme 6 April 2016

Question 2

What is threshold income

Answer 2

Includes everything spare from pensions contributions and income from tax free investment ISAs

Question 3

What are the tax rules when an annuity contract is in payment

Answer 3

25% is tax free 75% is taxed at your marginal rate

Question 4

What are the benefits of paying into a pension

Answer 4

Tax relief when paid in
Grows tax free
Outside your estate for iht purposes
Can take 25% tax free, rest is charged at marginal rate
Death benefits - under 75 whole amount tax free up to the LTS
Auto enrollment benefits you pay 5%, employer pays 3%

Question 5

What is the life time allowance

Answer 5

Amount can crystalise and get 25% tax free
1073100
25% of this can get tax free

Anything above charged at marginal rate

Question 6

Downsides of paying into a pension

Answer 6

Money tied up till 55
Clients thing can do better than a pension
Complex

Question 7

Paying into a pension

Answer 7

Anyone can pay into a pension from birth up until 75, technically can after but no tax relief

In order to contribute to a pension you need to have relevant income (pensionable income) this includes all salary, bonus, commission, self employed income, furnished holiday let income, patent rights income. IT DOES NOT INCLUDE RENTAL, DIVIDEND OR SAVINGS

Question 8

Paying into a pension

Answer 8

Anyone can pay into a pension from birth up until 75, technically can after but no tax relief

In order to contribute to a pension you need to have relevant income (pensionable income) this includes all salary, bonus, commission, self employed income, furnished holiday let income, patent rights income. IT DOES NOT INCLUDE RENTAL, DIVIDEND OR SAVINGS

Question 9

How much can you pay into a pension

Answer 9

Maximum contributions is 60,000 or 100% of relevant income with tax relief at your highest marginal rate

If are a non tax payer still get 20% tax relief

If have no relevant earning (pensionable income) max gross put in is 3600 or 2880 net as nets grossed up from 20% tax relief

Question 10

Types of pensions schemes

1. Personal pension plans or contract based scheme

Answer 10

Tax relief is by the relief at source method - I will contribute into this pension from my net pay - 20% automatically gets added to my contribution and this gives me my tax relief. If HRTP or ARTP must full out self assessment you get further tax relief. This gets paid to me not the pension.

Cannot get contributions out unless cancel within the first month or past age 55. If past first month will stay in arrangement or can transfer to another pension

Question 11

Types of pension schemes
2. Occupation scheme also known as a trust based arrangement

Answer 11

Tax relief - net pay arrangement (salary stays the same), deduct pension contributions from gross pay. All tax relief is given on day 1

If you leave the scheme within the first 3 months you are auto refunded contributions. If leave between 3 months and 2 years you are offered a refund on contributions. Special tax rates on refunds. It’s 20% on first 20k and 50% on anything above that. It is irrelevant of what tax payer you are. It is only your own contributions that are refunded not employer.

Question 12

Salary sacrifice

Answer 12

Different to net pay arrangement
It is a written agreement with employer to reduce salary in arrangement to pay that money into my pension plan as an employer pension contribution. Now salary is less, pay less NI and so will employer. Employer does not have to contribute these savings to my pension it is what is agreed. Note it does reduce salary for borrowing purposes. No limit on how much can salary sacrifice as long as does not bring below living wage.

Question 13

Relief at claim on a retirement annuity contact

Answer 13

Old - all contributions paid gross and had to apply to hmrc for all tax relief.

Question 14

Rules for employer tax relief

Answer 14

Mist use wholly and exclusive test e.g. much work for employer to receive employer contributions

Question 15

Recycling of tax free cash

Answer 15

Over a 12 month period must break all 4 rules

1. Is the PCLS greater than £7500
2. Have my contributions increased by more than 30% this year compared with last year
3. Are you recycling more than 30% of the PCLS which was withdrew
4. Was it premeditated

Question 16

Charges for recycling pension tax free cash - unauthorized payment charge!

Answer 16

Individual
1. Unauthorized payment charge of 40% on the original PCLS withdrawn, not the amount recycled
2. Subject to unauthorized payment surcharge this is applicable if the original PCLS is more than 25% of the pension fund - extra 15% surcharge

Scheme
3. Scheme who received the payments they get 15% section charge
4. If continue to do it they will be shut down as a pension scheme and subject to a 40% deregistration charge on the entire fund

Question 17

The annual allowance rules

Answer 17

The most you can pay into a pension and get tax relief. It includes all personal, employer contributions and the tax relief

AA this year 60k
Previous years 40k

Can carry forward for previous 3 tax years

If you go over AA you pay a tax charge at your highest marginal rate

If your annual allowance tax liability is over 2k you can ask the scheme to pay it out of your fund. Not guaranteed though. If Dc take from pot, of DB reduce benefits by tax charge

Question 18

Tax planning when considering the annual allowance

Answer 18

If I have paid 60k into my pension and used all my AA, then my employer contributes another 20k, I will be left with a tax change on this amount.

Employer does not get the charge always the individual

Question 19

Tapered annual allowance

Answer 19

If threshold income (total all income then minus all pension and tax free income) if this is under 200k there are no changes to the annual allowance

If threshold income is over 200k then you need to check their adjusted income (all taxable income, all employer and pension contributions) if adjusted income is over 260k your annual allowance reduces by £1 for every £2. Calculation is done on an annual basis as salary changes.

The maximum reduction to annual allowance is 50k (360k earning ls and over) so will always have 10k annual allowance

Question 20

Money purchase annual allowance
What is it

Answer 20

It is where you are limited to contributing £10,000 into a DC/money purchase pension arrangement

Question 21

What triggers the MPAA

Answer 21

If you take any funds from a DC scheme using UFPLS (uncrystalised fund pension lump sum) - each payment 25% tax free 75% taxed marginal rate

If in a capped drawdown and take more than 150% of GAD rate

If take income from flexi access drawdown - if take money from 75% pot it triggers it

If take income from a flexible annuity
If take income from a fixed term annuity

Question 22

What does not trigger MPAA

Answer 22

A scheme pension does not trigger it

A guaranteed lifetime annuity does not trigger it

If only take tax free cash from flexible drawdown does not trigger it

Question 23

Admin for triggering MPAA

Answer 23

If trigger MPAA from that date onwards to can co tribute 10k for the remaining tax year from trigger date and every subsequent tax years until a DC scheme

If go over 10k tax charge on excess at your marginal rate

The responsibility is on individual to notify their other pension schemes once they have triggered MPAA, this should be done within 91 days to monitor not going over limit

Question 24

Alternative annual allowance

Answer 24

You can no longer carry forward e.g. if only pay 5k this year cannot carry forward 15k next year - use it or lose it

DB contributions can still be made up to the annual allowance with carry forward and carry forward is only into DB scheme

Example
If put 10k in DC can still put 50k ina DB scheme

Example of carry forward
If put 8k in a DC scheme and 45k in a DB scheme total is 53k so can carry forward 7k into a DB scheme

Question 25

Pension input amounts

Answer 25

DC is total of sum you paid in, employer and tax man DB scheme is complicated just remember factor of 16 then times that number by CPI

Question 26

Carry forward of allowances

Answer 26

ability to carry forward unused relief from previous 3 tax years For this exam 2023/24 the relevant years will be 2020/21 40k 2021/22 40k 2022/23 40k It is only unused amount How it works in practice - use current allowance then go back to 2020/21 and use that unused allowance You need to have a pension running in the year you are carrying forward in order to carry forward, don't need to pay in just have one Exam tip for carry forward - if employer limited by salary, if director of limited company not capped by salary as can draw more money to use unused AA carry forward

Question 27

Lifetime allowance

Answer 27

Introduce first in April 2006 at 1.5 million The lifetime allowance is now £1,073,100 and the maximum PCLS is 25% of this so £268,275. This is the maximum tax free unless you have any other protection in place Once you go above you PCLS you pay tax at your marginal rate

Question 28

Transferring your pension overseas

Answer 28

Transfer charge of 25% of total fund value. If transfer into Europe classed as one country so no transfer charge

Question 29

Protection available to LTA available at A day Type 1 - primary protection

Answer 29

Primary protection Needed to have pension fund more than 1.5m. with the protection you were allowed to continue contributing How it is worked out At A day what was your entitlement to PCLS, all you do is at 20% to this number E.g. at A day fund with 3 million, your PCLS at the time is 25% of this so 750k, add 20% to this so 900k and this is now your PCLS. The only time can lose your primary protection is if have to give up some of your pension in a divorce settlement

Question 30

Enhanced protection

Answer 30

If you had enhanced protection you had to stop paying into your DB or DC, this scheme could still grow With enhanced protection you kept the same PCLS you had at A day and this is the same you have now. Negative if fund value decreased so does your PCLS You can now start to pay back into this scheme but fund was valued at 05/04/23 for PCLS purposes

Question 31

Fixed protection

Answer 31

Fixed protection is there to protection you as they reduced the LTA over time. For fixed protection you had to stop paying in and this meant could no longer get employer contributions Fixed protection 2012 your LTA is 1.8 million Fixed protection 2014 your LTA is 1.5 million Fixed protection 2016 your LTA is 1.25 million

Question 32

Individual protecti

Answer 32

Specific to you and what LTA you get in a specific year, you get 25% of that

Question 33

Accessing your pension - small pots

Answer 33

Applies to both DC and DB schemes Not tested against LTA Does not trigger MPAA Can take up to 3 lots of 10,000 from personal pensions. If occupational pensions can do unlimited amounts 25% of the amount taken is tax free - the rest is taxed as earned income - this is paid net of BRT, if HRTP or ARTP have to declare via self assessment No restrictions of time frame that you take small pots over Always first thing do when take pension

Question 34

Ways to take pension - trivial commutation

Answer 34

Only applies to DB schemes All needs to be done within 12 months Limit is 30k and this is the max, it is not per annum 25% is tax free the rest at EMERGENCY TAX LEVEL it is the total of all your DB funds they all must total below 30k If the scheme is already in payment any commutation amount would be taxable Note if I die, spouse can take 30k per scheme

Question 35

Triviality valuation of benefits

Answer 35

Scheme pension income pre A day - you value the annual scheme pension by x 25 Benefits crystalized payment after A day, value as if they would be for LTA purposes

Question 36

Accessing your DC pension before age 55

Answer 36

Ill health - unable to work, must be signed off by medical and employer. Can access before 55 and normal rules are in effect - negative miss out on years of contributions and growth of fund Serious ill health - less than 12 months to live - if under 75 access pension tax free - the pension fund needs to be uncrystalised It is all tax free up to the LTA then after this at marginal rate, either have to take all pension or none of it. Consider though if take it all, it will now be part of estate for iht purposes...

Question 37

Death benefits for a DC pension

Answer 37

If she below 75 whatever the fund is in e.g. crystalised, uncrystalised, drawdown - the death benefits are paid out completely tax free up to the LTA, anything above this is at the recipients marginal rate. Must be paid out within 2 years or all taxed at marginal rate

Question 38

Roles in a DC scheme

Answer 38

Nominee - who.i nominate to.reciece the fund in my death Successor - who the nominee nominates to take the fund after then, can go through the generations If person dies over 75 and passes to someone under 75 then they die. If they do not draw it out there is no tax and passed on tax free If pension moved into a trust 45% tax unless bare trust for someone under 18

Question 39

Rules for a DB or occupational scheme on death

Answer 39

Down to scheme rules and spouse or dependant only can receive ongoing pension. It is subject to tax regardless of the age of death

Question 40

Protected retirement age

Answer 40

In some circumstances you can have a protected retirement age which lets you retire before 55. E.g. sports person or dancer If do your LTA is reduced by 2.5% for each year you take it before age 55 If in armed forced doesn't effect you LTA for retiring early

Question 41

Choices in retirement 1. Secured - scheme pension

Answer 41

Scheme pension - must be paid least annually, it must be paid for the rest of your life and a max guarantee period of 10 years. I.e if die after 2 years continue to pay to estate for 8. Your scheme pension is secured income for life but can decrease in 2 circumstances - divorce or health improves. If scheme offers scheme pension, they must offer the opportunity for you to shop around first to see what's on the market

Question 42

Choices in retirement Annuity

Answer 42

Buying an annuity, once buy one you are locked in. Things to consider when buying an annuity If put all pension in annuity means no lump sum and that is that Minimum guarantee period, spouse cover, inflation linked, protected annuity lump sum in event of death All will reduce annuity pay out If annuity is paid to a care home it is paid gross Can pick an annuity without need for professional advice Annuity gain - buy early more people to hedge bets, annuity drag buy later in life less people buying annuity at your age so less

Question 43

Retirement options Capped drawdown

Answer 43

Can no longer take a capped drawdown out legacy 6 April 2015 capped drawdown is drawdown but your income is capped between 0% and 150% of GAD rates, if you go above this you lose your drawdown ability and go into flexi access. GAD rates are reviews every 3 years and once buy 75 reviewed annually Taking income from capped drawdown does not trigger MPAA If you die capped drawdown dies with you and is not passed on Reference date is when the pension was taken out Nominated date is within 60 days of reference date - have 60 days for actuaries to bulk do calculations on schemes

Question 44

Retirement options Flexi access drawdown

Answer 44

Get all tax free cash before start taking income Say pension pot of 400k take 100k tax free as PCLS. Other 300k to manage into retirement in drawdown, as long as don't touch 300k taking the 100k does not trigger MPAA

Question 45

Retirement options UFPLS uncrystalised fund pension lump sum

Answer 45

Do not get tax free sum in one go Say 400k.pot and withdraw 100k 25k is tax free 75k pay tax at marginal rate Can be useful for iht planning as each pot you take is crystalised but rest isn't so outside of estate Also if withdraw less than 12570 each year pay no tax all 75% falls into PA...

Question 46

Downsides of flexi access and ufpls

Answer 46

Running out of money. Not guaranteed income so can use it all up then have nothing left

Question 47

Defined benefit schemes

Answer 47

Guaranteed by employer and index linked Technical provision is the valuation of the schemes liabilities Scheme are trying to reduce their liabilities by increasing contributions for members and employees, reduce future accrual rates e.g. moving from 1/60th to 1/120th, or watching to career average earnings scheme as opposed to final salary. And can close scheme It is the scheme rules and the trustees who determines the rules of the final salary Note- teachers pension scheme based on best average 3 years out of last 10

Question 48

Defined benefit valuations

Answer 48

Revaluation - increase in amount of fund from when you leave scheme and stop paying into it to when pick it up a retirement age Escalation - how much the amount I receive increases once I take my DB pension The government sets minimums that they must increase by, in order to save monies the scheme and trustee could cut rates to the minimum Public sector usually increase by CPI and private is decided annually.

Question 49

Increasing your benefits under a DB scheme

Answer 49

This is for when want the number of years the DB scheme pays for to increase. Example - scheme retirement age is 65 and will pay for 20 years, if want 25 years then you have to pay an extra X% until retirement AVC - additional voluntary contribution - it is a DC scheme but directly linked to the DB scheme - you pay into avc and this provides tax free cash, means don't have to go into pension pot via commutation

Question 50

DB hybrid schemes

Answer 50

DC scheme with low DB accrual rate scheme At retirement you take the bigger pot

Question 51

Pension calculations for DB schemes

Answer 51

The accrual rate is based on the basic salary, it does not include things like bonuses

Question 52

DB scheme accrual rate of 1/60

Answer 52

With a 1/60th accrual rate there is no PCLS provided, if the client wants to take a lump sum must to it by the commutation route, giving up some of your annual pension income for a lump sum. E.g. commutation 12:1 you divide the lump sum want by 12 then take this from annual pension income. The lump sum is tax free

Question 53

DB scheme accrual rate 1/80

Answer 53

Auto get a PCLS tax free, it is 1/80 of the fund times by 3

Question 54

Working out max PCLS for DB scheme

Answer 54

20 x (pre commutation pension x the commutation factor) / (20+(3 x commutation factor))

Question 55

DB pension escalation rates

Answer 55

The rate in which DB scheme pensions in payment increase each year for individuals reaching spa after 6 April 2016 Before 1988 - no requirement 1988 to 1997 - no requirement for non GMP and CPI up to 3% for GMP schemes 1997 to 2005 - both non GMP and GMP CPI up to 5% 2005 onwards - both non GMP and GMp CPI up to 2.5%

Question 56

DB pension Revaluation rates

Answer 56

Revaluation is the date you left and stop contributing, the date left is the date used for revaluation in deferment (GMP) i.e how much goes up each year Date leaving service - fixed rate Before 1988 - 8.5% 1988 - 1993 - 7.5% 1993 - 1997 - 7% 1997 - 2002 - 6.25% 2002 - 2007 - 4.5% 2007 - 2012 - 4% 2012 - 2017 - 4.75% 2017 - 2022 - 3.5% 2022 onwards - 3.25% For non GMP 1991 - 2009 5% or CPI if less Post 2008 - 2.5% or CPI if less

Question 57

Annuity calculation where some requires yearly income and wants to know how much to crystalised

Answer 57

1. Work out home much per £100 2. 25 tax free so put this to side 3. 75% times annuity rate less tax 4. Add 25 to adjusted level, turn this into a % 5. Divide the required income by the net % per 100

Question 58

How to work out total net income under phased retirement using annuity of a pot of money from pension

Answer 58

1. 25% crystalised funds tax free 2. 75% of fund times by the annuity rate 3. Less tax 4. Add the 25% tax free sum to the adjusted 75% annuity after tax

Question 59

Freestanding AVC and personal pension plan are same thing

Question 60

What happens if take more than 25% PCLS?

Answer 60

55% unauthorized charge

Question 61

DB schemes and retiring early

Answer 61

If want to retire early it is possible but it is determined by the scheme rules and the trustee. It can vary and in exam it will give you the reduction rate, you take this from the annual salary. This is because if retire early scheme has to pay out for longer DB scheme bridging pension - takes place normally in redundancy, matches rate would receive at retirement.

Question 62

DB scheme and Ill health

Answer 62

All down to scheme rules, could give current amount built up or boost you to what would have For serious ill health tax free payment

Question 63

DB schemes and funding issues - fund valuations

Answer 63

To check the health of a scheme fund valuations are complete Ongoing scheme valuations- all scheme have to provide valuation every year and a full actuary valuation every 3 years Insolvency valuation - if scheme unable to fund 90% of scheme it will go into pension protection fund

Question 64

Pension transfers - this is transferring out of a DB scheme

Answer 64

If more than 30k need to get specialist sign off Needs to be uncrystalised Fca see transferring out of a DB thing not the right thing Once a year must receive statement of entitlement Got to transfer all benefits in one go

Question 65

Transfer values on DB schemes

Answer 65

Can go up or down based on annuity, lower investment returns, inflation...

Question 66

Contingent charging for DB schemes

Answer 66

Old structure of transfer and promoted pushing transfers through where not right thing, get all money if transfer goes through Can no only do it on two occasions, serious ill health or financial hardship

Question 67

Bridging advice method for DB transfers

Answer 67

Charge for research, then come back with decision to transfer or not to transfer, then final payment if go ahead

Question 68

Reasons to transfer out a DB scheme

Answer 68

Death benefits - a DB scheme can only go to a dependant A cautious investor would not move out a DB scheme

Question 69

Timeline for transfers of a DB scheme

Answer 69

Notice given by individual in form of a letter Within a month the scheme need to say if take financial advice i.e over 30k Within 3 months of letter from client need to provide statement of benefits and amount willing to transfer to personal pension 3 months once received for client to say if want to go ahead with transfer 3 months from when client wants to go ahead to compete

Question 70

Note what max benefit can get from DB scheme

Answer 70

Used to be 40 years now not capped

Question 71

Purpose of nest

Answer 71

Allow all employers to offer pensions

Question 72

Stakeholder pensions

Answer 72

Initially was a low cost solution that failed, it failed as employers were not obligated to pay in

Question 73

Demographics of pensions

Answer 73

People living longer, DB pensions closing down as have to fund for longer

Question 74

Government incentives to seek advice

Answer 74

Advice guarantee is where employer allowed to deduct £500 as a business expense to pay for financial advice for employees and is not a benefit in kind Pension wise - free guidance advice Pension advice allowance - if got no money take 3 x £500 out of DC pension pot to pay for advice

Question 75

Role of the government

Answer 75

Provider of the state pension Provide pension credit - means tested it is less then the state pension for those in need. Be the regulator - fca, ombudsman...

Question 76

Key roles in financial planning

Answer 76

Scheme member - individual Trustee - in charge of scheme, makes decisions. Note in DB scheme continue to manage into retirement, in a DC scheme once crystalised it's the individuals responsibility l

Question 77

DB scheme vs DC scheme - transfers

Answer 77

DB scheme can only transfer to dependant (spouse or child under 23) DC can go to anyone

Question 78

Regulation - the pensions regulator

Answer 78

Regulate all work based pension schemes, complete investigations, act to put things right . Help schemes look out for scams, now some responsibility is on the scheme

Question 79

Regulation - the financial ombudsman

Answer 79

Complaints and maarketing Maximum compensation is 415k plus costs plus costs on interest FOS - process and timeline Complaint needs to be acknowledged in 5 working days A holding letter needs to be sent within 4 weeks either to say completed investigation or need 4 more weeks Then after the extra 4 weeks outcome needs to be delivered, with info supplied that they can complain to FOS Once letter received for 6 months to take to FOS Note - can complain 6 years after event or 3 years after becoming aware

Question 80

The pensions ombudsman

Answer 80

Complain about running of scheme and anyone can complain, members, trustees...

Question 81

Pension rules in divorce

Answer 81

Earmarking - rubbish, benefits attached to ex, if ex remarries they lose the right to pension, I can control how pension is paid ex can't do anything, tax at my marginal rate then paid to ex and can't claim back Offsetting - I take house you take pension Sharing order - clean break equal split. Note if unfunded DB scheme only option is to become independent member of that scheme

Question 82

Transfer club

Answer 82

This is for unfunded DB schemes, the only option is to transfer to another unfunded DB scheme if move, this is referred to as transfer club. Unfunded DB schemes cannot be taken flexibly

Question 83

What is the only funded public DB scheme

Answer 83

Local government Rest of public sector DB schemes as unfunded

Question 84

Pensions and maternity / paternity leave

Answer 84

DB scheme everything stays the same in terms of pension contributions DC scheme slightly worse off - employer contributions stay same however because it is based of your % earnings and you earning will drop DC is slight worse off

Question 85

Old state pension nic rules

Answer 85

To get full basic state pension had to have 30 years nic, to get any state pension just had to get 1 year so would get 1/30 state pension

Question 86

Old state pension rules and self employed

Answer 86

Only entitlement was basic state pension could get anything more

Question 87

Old state pension rules and employed

Answer 87

The below all built in each other giving more entitlement S2P 2002-2016 SERP 1978-2002 Graduated pension 1961-75 Basic state pension

Question 88

Old state pension rules - contracting out

Answer 88

2 ways to contact out Part of DB scheme and employer pulls out - they have to offer GMP You contact out by a personal pension - still pay nic but gov pay it to your personal pension Where says protected rights in personal pension just means money has come from nic

Question 89

Category b pension

Answer 89

State pension where built up less than 60% nic can use spouses

Question 90

New state pension - single tier pension nic rules

Answer 90

To get full state pension need 35 years nic And minimum to receive any state pension is 10 years so 10/35ths

Question 91

The triple lock

Answer 91

It is the rate single tier pension goes up by and the basic rate pension Higher of 2.5%, CPI inflation or national average earnings increase The rest under old scheme including protected payment only go up by CPI

Question 92

Foundation amount and protected payment a

Answer 92

When moved to new signal tier pension if under old rules someone had accrued more than new they got to keep their allowance - names foundation amount. The difference between single tier state pension and foundation amount is known as protected payment

Question 93

State pension and moving abroad

Answer 93

Only get increase in state pension if move to Europe If move outside Europe still get it though

Question 94

Integrated state pension

Answer 94

Where employers considers amount get from state pension when calculating benefits

Question 95

When did contracting out end

Answer 95

2016 for DB scheme 2012 for personal pensions

Question 96

State pensions age

Answer 96

Currently 66 By 2028 be 67 and at that point want to align 10 year gap with personal pension

Question 97

State pensions age

Answer 97

Currently 66 By 2028 be 67 and at that point want to align 10 year gap with personal pension

Question 98

State pension age and nic

Answer 98

Once built 35 year nic still have to contribute till hit spa at that point can stop

Question 99

Taxation of state pension

Answer 99

Always paid gross but is taxable - takes up part of personal allowance If have no personal allowance have to declare through self assessment

Question 100

Differing the state pension

Answer 100

You can defer even if currently in payment but only once Anyone who reached SPA before 6 April 2016 The minimum deferral period is 5 weeks, if defer 5 weeks get extra 1% on pension when start taking it. If leave it 12 months extra 10.4% if leave 2 years get 20.8%. if left 12 months could get missed payments and extra 2% as cash lump sum. Ifa died in deferral any benefits get paid to estate Tax deferral keeps you in same tax band when receive payment Anyone who reaches state pension age after 6 April 2016 Minimum deferral period is 9 weeks, get 1% on pension. If leave it 12 months it's an extra 5.78%. cannot no longer take cash lump sum. If die no guarantee paid to estate

Question 101

Bereavement payments

Answer 101

Got to be under state pension age Claimed by spouse or civil partner Paid for 18 months - amounts in tax table!

Question 102

Types of individual DC schemes

Answer 102

PPP (personal pension plan)/ stakeholder / nest - all individual plans GPP (group pension plan) / group stakeholder - exactly same as PPP apart from do not get to decide the pension provider SiPP (self invested personal pension) - wider investment choice

Question 103

Types of occupation DC schemes

Answer 103

All pay into same pot and money gets allocated out to us once we retire Occupational money purchase scheme (OMPS) - employer scheme in its own right Executive pension plans (EPP) - separate scheme for senior staff Small self administered schemes (SSAS) family businesses, every member has to be a trustee! S32 - only designed to accept transfers in from other occupational schemes - cannot pay into it

Question 104

Borrowing rules for SIPP and SSAS

Answer 104

Can only borrow to purchase commercial property and can only borrow 50% if net asset if the scheme Example fund 200k and already had 40k borrowing can only borrow another 40k

Question 105

SSAS loan rules to employer

Answer 105

Can borrow from pension pot, loan up to 50% of assets, must charge least 1% above base rate with 5 year maximum term that can be rolled over only if employer struggling to meet payments

Question 106

Auto enrollment

Answer 106

Has to be offered to anyone who has a contract with one person

Question 107

Can you opt out of auto enrollment

Answer 107

Yes but must be auto enrolled every 3 years

Question 108

Auto enrollment - how much does each person pay

Answer 108

Employer 3% Employer 5%

Question 109

Categories of auto enrollment

Answer 109

Employers must let all employees know what category they are in Eligible job holder - between 22-SPA earning over 10k Non eligible job holders - between 22 -SPA earning between 6240 and 10k or anyone 16-22 or spa to 75 earning over 10k - can ask to join the scheme and employer must pay 3% Entitled worker - can join but no entitlement - between 16 -75 earning less than 6240

Question 110

In specie

Answer 110

When put property or non cash asset into a pension must be valued correctly if no tax charge on it

Question 111

Tax relief for employers

Answer 111

Where employers significantly increase their pension contributions in comparison to previous years, there may be the need to spread the tax relief over multiple year Have contributions exceeded 210% of the contributions in previous tax rates Is the excess more than 110% Is it more than 500k 500k to 999,999 - 2 accounting periods 1m to 1.999m - 3 accounting periods Over 2m - 4 accounting periods

Question 112

Critical yields

Answer 112

Relating to annuity - the amount of investment return needed after costs and charges to remain the same level of annuity CY A is what need to match annuity CY B is what need to beat annuity Can give A on its own, cannot give B without A Example CY A want 10k per year would need to return 5% CY B if want 12k a year would need to return 6.5%

Question 113

Safe guarding benefits

Answer 113

Got to be a fund over 30k apploed to dB, section 32, gmps, guarantee annuity rates, guarantee fund values

Question 114

Alternatives to pensions

Answer 114

Buy to let's ISA Lisa My own business Eis seis vct

Question 115

What is min number for a master trust

Answer 115

3

Question 116

Statutory money purchase illustration

Answer 116

Needs to be provided when someone takes out a new or contributed to one. Includes all info on pension Only pension scheme that does not need this is SSAS or dB scheme

Question 117

Fact finding

Answer 117

Client factors to consider, capital and income, capacity for loss, attitude to risk, timeframes, ethical, asset allocation

Question 118

Lifestyle fund

Answer 118

Switch asset allocation with view to move funds into cash near retirement to buy annuity - more old school

Question 119

Lifestyle fund

Answer 119

Switch asset allocation with view to move funds into cash near retirement to buy annuity - more old school

Question 120

What does swr mean

Answer 120

Safe withdrawal rate

Question 121

What does swr mean

Answer 121

Safe withdrawal rate

Question 122

How is small pots taxed

Answer 122

25% tax free, then 75% paid less 20% tax - if hrtp or artp must declare in self assessment

Question 123

At what age do you stop recieving tax relief when pay into a pension

Answer 123

75

Question 124

Transferring benefits to a qualifying recognised overseas pension scheme causes a

Answer 124

Benefits crystallisation event to occur

Question 125

What do critical yields take into account

Answer 125

Mortality drag

Question 126

dB transfer into SiPP

Answer 126

Main assumption is the discount rate to calculate the cost uses current gilt yeild investment returns and a product charge on .75%

Question 127

When applying for pension credit how is an individuals existing personal independence payment treated when calculating their total weekly income

Answer 127

It is disregarded immediately

Question 128

Lifestyle funds

Answer 128

Adjust automatically at predetermined dates

Question 129

Can sipps accept in specie transfers of investment

Answer 129

Yes

Question 130

Nest is an employer scheme

Question 131

PPF of in payment get 100% If not 90%

Question 132

Serious I'll health

Answer 132

Must be uncrytalsid Must be under 75 Take all as lump sum tax free