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The Technical Quiz: 11 July

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

The Technical Quiz MM 480

QUESTION ONE: HMRC set out a number of requirements for adviser charging from a registered pension scheme to be paid without resulting in an unauthorised member payment. Which one of the following is most likely to be considered an unauthorised member payment?

A) A fee invoiced to the pension scheme administrator for advice relating to a pension transfer

B) A fee invoiced to the pension scheme administrator for advice relating to a pension transfer which included VAT

C) A fee invoiced to the pension scheme administrator for advice relating to a pension transfer and the commencement of capped drawdown

D) A fee invoiced to the pension scheme administrator for advice relating to a pension transfer and the provision of retirement income drawn from an ISA

QUESTION TWO: Damien is in receipt of advice to crystallise his benefits under a GPP of which he is a member. The accumulated fund value is £100,000. He will take the maximum PCLS and secure a lifetime annuity by exercising his right to an OMO. The annuity office is paying adviser remuneration of £1,000 from the annuity purchase price this will mean that

A) The PCLS is £25,000, £74,000 is applied to the annuity and £1,000 is paid as adviser remuneration

B) The PCLS is £24,000, £75,000 is applied to the annuity and £1,000 is paid as adviser remuneration

C) The PCLS is £24,750, £74,250 is applied to the annuity and £1,000 is paid as adviser remuneration

D) The PCLS is £24,250, £74,750 is applied to the annuity and £1,000 is paid as adviser remuneration

QUESTION THREE: Dawn is in receipt of advice to partially crystallise her benefits under a PP. The accumulated fund value being crystallised is £100,000. She will take the maximum PCLS and designate the remainder as a capped drawdown pension. The PP provider is paying adviser remuneration of £1,000 from the designated fund which will mean that

A) The PCLS is £25,000, £74,000 is designated to capped drawdown and £1,000 is paid as adviser remuneration

B) The PCLS is £25,000, £75,000 is designated to capped drawdown from which £1,000 is paid as adviser remuneration

C) The PCLS is ££24,750, £74,250 is applied to calculated the capped drawdown and £1,000 is paid as adviser remuneration

D) The PCLS is £24,250, £74,750 is applied to calculated the capped drawdown and £1,000 is paid as adviser remuneration

QUESTION FOUR: David is crystallizing his SIPP currently valued at £500,000.  He receives advice setting out his options to taking his income benefits. The fees relating to this advice amounted to £4,000 which were paid by the SIPP. David then decided to crystallise via a drawdown pension, taking the maximum PCLS. A further fee of £2,000 is to be paid from the SIPP. Which one of the following statements sets out the position in respect of the PCLS and the designated rights?

A) The maximum PCLS drawn is £125,000 and the designated fund is £375,000 from which the fees of £6,000 are paid

B) The fees of £6,000 are paid from the SIPP.  PCLS £123,500 is paid out and the remainder of £370,500 is designated to capped drawdown

C) The fees of £4,000 are paid from the SIPP.  PCLS £124,000 is paid out and the remainder of £372,000 is designated to capped drawdown from which the remaining £2,000 fees are paid

D) The fees of £2,000 are paid from the SIPP.  PCLS £124,500 is paid out and the remainder of £373,500 is designated to capped drawdown from which the remaining £4,000 fees are paid

QUESTION FIVE: Fred is in capped drawdown via a PP and after receiving advice decides to transfer the funds, amounting to £600,000 on 1 May 2013, to a SIPP. The next triennial review is due on 1 April 2016. Adviser remuneration is paid from the SIPP amounting to £6,000, ie 1% of the transfer. This will

A) Result in a 1% reduction in the maximum income that the SIPP can pay under capped drawdown

B) Result in the maximum income under capped drawdown being recalculated at the next anniversary

C) Result in the maximum income under capped drawdown being immediately recalculated

D) In no change in the maximum income that can be paid out from the SIPP until the next triennial review is due

Questions supplied by Technical Connection

_________

Answers

1 D
2 A
3 B
4 C
5 D

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