1. Alice has the following income and benefits in the tax year 2016/17

Transcription

1 1. Alice has the following income and benefits in the tax year 2016/17 Salary 100,000 Company car 5,000 Dividends 4,000 Income from a rental property 10,000 Employer pension contribution 60,000 (carry forward of 20,000 from a previous year being used) When considering whether she is liable to the Tapered Annual Allowance what is her Adjusted income? a. 104,000 b. 179,000 c. 119,000 d. 160, Frank has an Adjusted income of 167,000 and a Threshold income of 127,000 during the 2015/16 tax year. What is his Annual Allowance for that year? a. 23,000 b. 40,000 c. 31,500 d. 80, Which of the following lump sum benefits would trigger the Money Purchase Annual Allowance? a. PCLS where the residual amount is designated to drawdown b. Trivial Commutation Lump Sum c. Uncrystallised funds pension lump sum d. Uncrystallised funds lump sum death benefit 4. There are special rules for the pension input amount for certain hybrid arrangements where the money purchase annual allowance applies. Which of the following would not trigger the Money Purchase Annual Allowance? a. An individual has flexibly accessed their pension saving b. The defined benefit pension input amount is usually the highest c. They have at least one hybrid scheme that was set up on or after 14 October 2014 which could pay either money purchase or defined benefits d. The money purchase input sub-total is less than 10, Which of the following is not a condition that has to be met for a payment to be deemed to be an uncrystallised funds lump sum? a. It is payable from uncrystallised rights held in a money purchase arrangement b. It is payable from age 60 or earlier protected pension age or ill health c. The lump sum must be within the member s lifetime allowance d. It cannot be paid from disqualifying pension credits

2 6. Albert, who is 42, holds a small amount of benefits in his employer s defined benefit occupational pension scheme and wishes to take the benefits under the ill health rules, which of the following best describes the options that would be available to him from 6 April 2015? a. Trivial commutation lump sum b. Trivial commutation lump sum, small pots lump sum and an uncrystallised funds pension lump sum c. Trivial commutation lump sum, small pots lump sum, scheme pension with PCLS d. None of the above 7. Which of the following, regarding short-term annuity contracts, is not applicable since 6 April 2015 a. It can be purchased from capped drawdown plan b. It can be purchased from a flexi-access drawdown plan c. The member has to be given the opportunity to choose the provider that pays the annuity d. Income from a short-term annuity can go down as well as up 8. Which of the following is not true for a drawdown to drawdown transfer, from 6 April 2015? a. The member can t have been a member of the receiving scheme for 12 months or more b. The transfer must be made to a new empty arrangement c. The transfer of a capped drawdown contract is able to be converted to flexi-access on transfer d. It is possible to transfer a flexi-access drawdown contract 9. Ian has a pension input period that runs from 2 May 1 May each year. He contributes 40,000 on 2 May 2014 and a further 40,000 on 2 May Ignoring carry forward how much extra can he contribute after 8 July 2015 and before 6 April 2016? a. 40,000 b. 0 c. 80,000 d. 50, Daisy has a flexible income drawdown plan that was established on 3 September 2014, she has yet to take any income from it. What is her annual allowance for the 2015/16 tax year? a. 0 b. 40,000 c. 10,000 d. 80, Angela decides to take some of her pension benefits, which of the following will not trigger Money Purchase Annual Allowance reporting requirements on both Angela and the Scheme Administrator? a. A lifetime annuity where the amount can be decreased at Angela s discretion. b. UFPLS payment. c. payment from capped drawdown in excess of GAD limit d. small pots lump sum payment

3 12. David has a personal pension with ABC Ltd and wishes to access his pension via the pension flexibility rules. The Scheme Rules do not make any such provision. What needs to happen for David to be able to take advantage of the new rules? a. The Trustees are obliged to make an amendment to the rules b. David can insist on being allowed to take his benefits as it is allowed under the legislation. c. David will not be allowed to take the benefits as it is not in the Scheme Rules. d. None of the above. 13. As part of FCA s new compliance requirements, which government initiative do pension providers have to make members aware of? a. The Pensions Regulator b. Department for Work and Pensions c. Pensions Wise d. TPAS 14. As of 6 April 2015 a suitability report must include potential disadvantages of income withdrawal or short-term annuity. Which of these is not such a potential disadvantage? a. Capital value may be eroded b. Annuity/Scheme Pension rates may be better in future c. Income may not be sustainable d. Tax implications 15. Drawdown illustrations will still have to include certain information, which of the below is incorrect? a. Projected open market option values and the amounts of annuity available after 5 years b. Amount of income and projected value of funds at 5 yearly intervals to age 99 using lower, medium and high returns c. Assumed level of income d. Amount of annuity available currently in the market. 16. Which of the following benefits are considered to be safeguarded benefits? a. Plans that provide a guaranteed cash amount b. Plans that guarantee a minimum investment return (such as the guarantee on some with-profit funds) c. Plans with a protected tax free cash amount d. Money purchase plans with a guaranteed annuity rate 17. The construction of what type of scheme introduces a promise of some kind relating to part of the benefits available at retirement? a. Defined contribution scheme b. Defined benefit scheme c. Shared risk scheme d. Collective benefits scheme

4 18. What is the main advantage of being a member of a collective benefits scheme? a. Exposure to investment risk is reduced by the increased size of the fund. b. Any risk is transferred to the employer c. Individual members have control over the investment of their contributions d. There is the ability to take advantage of the new pension flexibilities. 19. In light of the new flexibilities members of unfunded public sector schemes only have an automatic right to transfer their benefits in which situation? a. Member has to be deferred member of the scheme b. The member must exercise the right before crystallisation c. The member s CETV in respect of their benefits is below 30,000 d. None of the above 20. The trustees must not transfer a member s safeguarded benefits until they have received a written transfer request from the member along with written confirmation, signed by the adviser of the following: a. The adviser has the relevant permissions to advise on pension b. The advice has covered the member s request to transfer all of their benefits c. The benefits are below 30,000 in value d. The adviser s FCA registration number 21. How often does a member have a right to apply for a statement of entitlement? a. Once every 12 months b. Once every 6 months c. Whenever they request it d. They do not have a right 22. Which body provides regulatory guidance on DB to DC transfers and conversions? a. HMRC b. FCA c. TPR d. TPAS 23. TPR provides a checklist of common indicators of a pension scam and gives guidance for trustees on making further enquiries when carrying out due diligence on a receiving scheme. Which of the following is NOT considered to be a potential indicator of a pension scam? a. Using overseas investments b. The member has been advised that there will be no contributions paid by themselves or the employer c. The member has been told they can t access their pension before age 55 d. the scheme is sponsored by an employer that doesn t employ the member

5 24. TPR may extend the trustees six-month payment deadline to pay the transfer payment in limited circumstances but only if the trustees make an application within what timescale? a. Six months from the end of the payment deadline b. Six months from the date of the transfer request c. Twelve months from the end of the payment deadline d. Twelve months from the date of the transfer request 25. As part of the 2014 Budget, the Chancellor announced some transitional rules surrounding block transfers for clients who have reached, or will reach normal minimum pension age on or before 5 October 2015 to allow them to make a block transfer as a single member. Which of the following was NOT part of these transitional rules? a. The transfer is made between 19 March 2014 and 6 April b. Only the member s transferred benefits under the receiving scheme must come into payment before 6 October c. All of the sums and assets that represent the member s rights under the original scheme are transferred. d. The transfer is made as a single transaction 26. Under personal pension schemes in which of the following circumstances is a refund of contributions allowed? a. The member has made personal contributions, in a tax year, in excess of their relevant UK earnings b. The member has exceeded their Annual Allowance c. The member has exceeded the Lifetime Allowance d. The member has been a member of the scheme for less than 3 months 27. Hilary is aged 50, has had to cease work due to an illness and has been advised she will not be able to return to work, she wishes to take her benefits from her money purchase pension arrangement and wants to know what options may be available. (i) UFPLS. (ii) Lifetime Annuity. (iii) Flexi-access drawdown. (iv) trivial commutation lump sum payment a. (i) and (iv) only b. (ii) and (iii) only c. (i), (ii) and (iii) only d. All four options 28. The payment of an UFPLS is an event which will trigger the MPAA. What will their annual allowance for all benefits be, from the trigger event date? a. 10,000 b. 10,000 plus carry forward of unused money purchase contributions from previous years c. 40,000 d. 10,000 for money purchase benefits and 10,000 for their defined benefits

6 29. With the introduction of flexi-access drawdown, from 6 April 2015, how often will a GAD review need to be carried out on these contracts? a. No requirement b. Every 3 years c. Every 12 months d. Every 5 years 30. Bill was in flexible income drawdown prior to the changes in April 2015, what happens to that contract on 6 April 2016? a. Bill has the option to convert it to capped drawdown b. It automatically converts to flexi-access drawdown c. Bill has the option to convert it to a flexi-access drawdown d. Nothing, it continues as a flexible income drawdown plan 31. Sally has benefits worth 25,000 in her employer s defined benefit scheme and has reached age 55, which of the following options are available to her? a. Trivial commutation lump sum b. Transfer to a defined contribution scheme on a non-advised basis c. Scheme pension d. All of the above 32. When explaining benefits of purchasing an annuity as opposed to flexi-access drawdown which of the following would be viewed as a benefit of purchasing an annuity? (i) Guaranteed income during lifetime. (ii) The level of income is set at outset and cannot normally be altered. (iii) The residual funds can be passed from generation to generation. (iv) Enhanced annuity rates a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iv) only 33. When discussing flexi-access drawdown which of the following statements is incorrect? a. Triggers the MPAA. b. Removes some exposure to pension fund s investment risk. c. Net amount released does not form part of member s estate d. Each payment will be taxed under PAYE in the tax year of receipt. 34. Which of the following is correct regarding a small pot lump sum? a. Taking such a lump sum payment will trigger the MPAA. b. Taking such a lump sum is a BCE and will use up some lifetime allowance c. The whole payment will be taxed under PAYE d. The minimum age to take such a lump sum is normally 55

7 35. Andrew, aged 77, died in July He nominated his son, Peter, to receive the death benefits from his uncrystallised funds, held in a self invested pension fund. Peter decides to take these benefits as a lump sum and receives the payment in August It is correct to say the tax position of these benefits will be: a. Taxed at Peter s marginal rate of tax and measured against Andrew s lifetime allowance. b. Taxed at 55% and measured against Peter s lifetime allowance c. Taxed at 45% d. Paid free of tax 36. John s wife, Mary, aged 65 died and as a result he will be entitled to a trivial commutation lump sum death benefit from her lifetime annuity. What should John be aware of? a. It must extinguish his right to any payments under that guarantee period b. It is subject to a maximum of 18,000 c. He must be over 55 to be able to be paid this lump sum d. He must be under age 75 to receive it. 37. Stephen designated funds to a capped drawdown arrangement on 1 July He is unhappy with the performance of his current provider and transfers it to another scheme on 16 August What should Stephen take into consideration? a. The drawdown plan will automatically convert to flexi-access on transfer b. It must transfer to a new empty capped drawdown arrangement c. He will be liable to the MPAA on transfer d. His next GAD review will be 16 August On 6 April 2015 Alice transferred her section 32 buy-out plan which included scheme specific tax-free cash in excess of 25% to a new self invested personal pension. How must the benefits from the SIPP be crystallised for her to keep her entitlement to the protected tax free lump sum? a. She must crystallise ALL of the benefits under the receiving scheme on, or before, 5 October 2015 b. She has lost her entitlement to the protection c. The transferred funds must be crystallised on, or before 5 October 2015 d. She must take her protected tax-free lump sum and purchase a lifetime annuity with the residual funds. 39. John has paid up benefits in two individual personal pensions valued at 15,000 and 4,000. He would like to take these benefits under the triviality rules, it is correct to say: a. He cannot take them, as the total value is in excess of 18,000 b. The commutation period of 12 months will start at the nominated date. c. John has to be at least 55 d. He cannot take them under triviality rules, as they are not held in a defined benefits scheme

8 40. Jason, died, when he was 60 with 500,000 in a capped drawdown plan. His widow, Mary, aged 65, has elected to take the death benefits by way of flexi-access drawdown, but takes no income as she is in receipt of a lifetime annuity, a scheme pension and has her own drawdown income fund. Mary has 10% of her lifetime allowance remaining. What benefits will be measured against her lifetime allowance when she reaches age 75? a. Any increase in value of both drawdown plans b. Any increase in value of her drawdown plan only c. The increase in value of both drawdown plans and the increase in her scheme pension from outset d. None of the above 41. Shaun was born on 1 July 1970, at what age will he be entitled to claim his state pension? a. 65 b. 66 c. 67 d Under the new single tier state pension what amounts are taken into consideration when calculating the foundation amount? (i) the amount payable under the current State Pension rules (ii) the amount payable if the new single-tier State pension had been in place at 5 April 2016 (iii) the amount payable if the new single-tier State pension had been in place at the start of working life a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iii) only 43. How many years of satisfactory NI contributions will somebody have needed to pay to receive some state pension under the single tier state pension regime? a. 35 b. 30 c. 15 d Those who reach their state pension age under the current regime will still be able to defer taking their state pension under the current regime after 6 April However, new rules have been introduced, which of the following is not included in the new rules? a. The minimum deferral period is nine weeks b. The rate of increase during deferral will be 1% for every nine weeks of deferral. c. A lump sum will not be available.

9 d. Deferred state pension cannot be inherited by a spouse or civil partner. However, up to six months arrears will be claimable by the deceased person s estate. 45. Which of the following benefits are being introduced from 1 April 2016? a. Widowed Parent s Allowance b. Bereavement Allowance c. Bereavement Support Payment d. Bereavement Payment Case study based questions: James, aged 57, is married to Angela aged 45, they have two children, Andrew and Julie, who are 15 and 17 respectively. James is still working and has uncrstyallised money purchase benefits of 1.5m and is a member of his employer s defined benefits scheme with an entitlement to a scheme pension of 50,000 pa at age 60 when the standard lifetime allowance will be 1m. 46. If James has no form of lifetime allowance protection what options would be available to him if he were to take the money purchase benefits today? a. He could take up to 25% PCLS of the money purchase benefits. b. He could take up to 25% PCLS of the amount up to 1.25m c. He could take up to 25% PCLS of the amount up to 1m of his money purchase benefits. d. He could crystallise his money purchase benefits and defer taking his PCLS until he took the defined benefits. 47. If James was to die today what would be the lump sum payment made by the money purchase arrangement provider to his beneficiary? a. 1.5m b. 1.25m c. 1m d. 2.5m 48. If James decided to take his defined benefits at age 60 and took his money purchase benefits 2 years later what, if any tax charge would he be liable for? a. 45% tax charge on the money purchase benefits, if taken as a lump sum b. 55% tax charge on the money purchase benefits if taken as a lump sum c. Marginal rate of tax on the money purchase benefits if taken as a lump sum d. None of the above 49. If James decides to take 250,000 as an UFPLS and three small lump sum payments of 10,000 each from his money purchase benefits how much will he receive as a PCLS? a. 82,500 b. 62,500 c. 92,500

10 d On James death Angela designated the money purchase benefits to nominee s flexi-access drawdown. Unfortunately, she died at the age of 55 with 1m remaining in the drawdown fund. She nominated that each of their two children should receive the benefits on a 50:50 basis. What options are not available to Andrew or Julie? a. Dependant s flexi-access drawdown b. Mix of lump sum and drawdown c. Survivor s flexi-access drawdown d. Survivor s lifetime annuity.

11 Answers Q ANSWER Q ANSWER 1 B 26 A 2 D 27 C 3 C 28 C 4 D 29 A 5 B 30 B 6 C 31 D 7 C 32 D 8 A 33 C 9 B 34 D 10 C 35 C 11 D 36 A 12 D 37 B 13 C 38 B 14 B 39 D 15 A 40 B 16 D 41 C 17 C 42 D 18 A 43 D 19 D 44 D 20 B 45 C 21 A 46 B 22 C 47 A 23 C 48 B 24 B 49 D 25 b 50 A