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Technical Quiz – Sept 27

To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions. Answers below.

The following questions all relate to pension scheme death benefits from crystallised rights.

Question 1: Where a member dies whilst taking a drawdown pension, which one of the following describes the options available to his surviving civil partner in respect of the remaining drawdown pension fund?

A) only a lump sum can be paid, less a 55% income tax charge

B) only a lump sum can be paid, less a 35% income tax charge

C) the residual fund can be used to provide either a lump sum or a dependant’s pension. The lump sum is subject to a 55% income tax charge whilst the dependant’s pension is subject to PAYE

D) the residual fund can be used to provide a combination of a lump sum or a dependant’s pension. The lump sum is subject to a 55% income tax charge whilst the dependant’s pension is subject to PAYE

Question 2: Simon dies, aged 78, whilst drawing a scheme pension paid out of his SSAS fund. Under the legislation what options are open to the trustees assuming the scheme rules permit:

A) to pay a dependant’s scheme pension, only

B) to pay either a dependant’s scheme pension or a dependant’s annuity

C) to pay either a dependant’s scheme pension, or a dependant’s annuity, or a dependant’s drawdown pension

D) to pay one or more of the following, a dependant’s scheme pension, a dependant’s annuity, or dependant’s drawdown pension

Question 3: David, aged 58, was in receipt of a drawdown pension when he died, on 20 January 2011. His widow, Mabel aged 57, was quite distraught and has only recently been able to make any financial decisions. On 22 August 2012 she decided that she would draw her dependant’s pension by means of a drawdown pension. By when must the maximum income next be reviewed?

A) 20 January 2014

B) 20 January 2015

C) 22 August 2014

D) 22 August 2015

Question 4: Cameron died age 76. His Sipp was valued at £500,000, of which £250,000 had been designated to a drawdown pension and the remaining £250,000 had not yet been crystallised. On his death he had neither relatives nor anyone who was financially dependent upon him. He instructed that the entire value of his Sipp, net of any taxes should be paid to Cancer Research. How much will the charity actually receive?

A) £225,000

B) £335,000

C) £362,500

D) £500,000

Question 5: An annuity protection lump sum death benefit can be paid:

A) Irrespective of the age of the individual at the date of death

B) Irrespective of the age of the individual at date of death, but only to a financial dependant of the late annuitant

C) Only prior to age 75

D) Only prior to age 75 and to a financial dependant of the late annuitant

Questions supplied by Technical Connection

Answers:

1 D

2 D

3 C

4 D

5 A

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