10 - Pensions

Question 1

Are pensions schemes registered with HMRC subject to tax on income or gains?

Answer 1

No, which makes them a good investment

Question 2

What are the two types of pensions schemes?

Answer 2

Personal and occupational

Question 3

What is the benefit of an employee and employer contributing to an occupational pension scheme?

Answer 3

• Contributions are an exempt benefit for the employee, and:
• a tax-deductible expense for the employer

Question 4

Who can contribute to a pensions scheme?

Answer 4

Anyone, even of not earning, up to the age of 75. As well as 3rd parties (parents can contribute on behalf of their children)

Question 5

What is the maximum tax relievable contribution that can be made to a pension scheme?

Answer 5

Your personal tax relief is limited to your total relevant UK income. If you do not have any earnings, the maximum you can contribute is £3,600

Question 6

What is the benefit for higher rate tax payer for making personal pension contributions if done at source/via the tax return (after tax deductions)?

Answer 6

Their basic rate limit is increased by the gross amount of contributions made

Question 7

What is the annual allowance for total gross EMPLOYEE pension contributions to an individuals pensions scheme in any tax year FROM 23/24?

Answer 7

£60,000

Question 8

What is tapered annual allowance in regards to pension contributions?

Answer 8

The pension annual allowance is reduced by £1 for every £2 over £260,000 their adjusted income is (This is limited so that it can only be reduced to a minimum of £10,000)

Question 9

What is adjusted income of an employee in regard to pensions?

Answer 9

Net income + employee pensions contributions to occupational scheme + employers contributions to an occupational or personal scheme

Question 10

How many years can the pension annual allowance be carried forward?

Answer 10

Up to 3 years

Question 11

When might the pension annual allowance not be available to carry forward?

Answer 11

If the person was not a member of a pension scheme in the year concerned

Question 12

What amounts contribute towards the pensions annual allowance?

Answer 12

Employee and employer contributions as well as any government contributions

Question 13

What % of the total pension is allowed as a tax free lump sum?

Answer 13

25%

Question 14

After the lump sum, how is all other pension income taxed?

Answer 14

As non-savings income at the individuals marginal rate

Question 15

At what age can someone start withdrawing from their pension?

Answer 15

55

Question 16

What is the annual allowance for total gross EMPLOYEE pension contributions to an individuals pensions scheme in any tax year BEFORE 23/24?

Answer 16

£40,000

Question 17

What is an annual allowance charge in relation to pensions?

Answer 17

The difference between actual pension contributions and allowable pension contributions, this amount is added to the employment income to remove the tax relief obtained on the excess contribution