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The Technical Quiz: 12 December

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

The following questions all relate to capped drawdown pensions.

QUESTION ONE

Andy commenced an unsecured pension on 31 December 2010. The latest date his maximum income must be recalculated will be on:

A) 31 December 2013

B) 31 December 2014

C) 31 December 2015

D) 31 December 2016

QUESTION TWO

Barry commenced capped drawdown on 15 February 2012 when the rounded down yield for 15-year UK gilts from the FTSE UK Gilt Indices was at an historic low of 2.25 per cent. Since then his designated drawdown fund has performed surprisingly well and he has asked you when he will next be able to recalculate the maximum income under capped drawdown. Your answer will be:

A) At any time of his choosing, subject to the agreement of the scheme administrator

B) On the next drawdown year anniversary, ie 15 February 2014, but this is subject to the agreement of the scheme administrator

C) On the next drawdown year anniversary, ie 15 February 2014, this does not require the prior agreement of the scheme administrator

D) It is not possible to review the maximum income until 15 February 2015

 

 

QUESTION THREE

Carmen commenced capped drawdown on 6 April 2012 and only took her PCLS having decided not to take any drawdown pension income in her first drawdown year. Early on in her second drawdown year she has decided to draw the maximum income, annually in advance, and has also asked if it is possible to draw some or all of the income she did not take during her first drawdown year. You tell her that:

A) No, it is not possible to do this. The maximum income that can be taken under capped drawdown in any year is 120% of the basis amount

B) It is possible to draw up to 25% of the maximum income from an earlier year, if no income was taken during that drawdown year

C) It is possible to draw up to 50% of the maximum income from an earlier year, if no income was taken during that drawdown year

D) It is possible to draw up to 75% of the maximum income from an earlier year, if no income was taken during that drawdown year

QUESTION FOUR

Dee attained age 75 on March 2012 with two capped drawdown arrangements under her scheme, with year-end anniversary dates of 20 January and 2 February respectively. She is now looking, if possible, to align these. Her options are:

A) She can only shorten the year that is due to end on 2 February 2014 so that it ends on 20 January 2014

B) She can only extend the year that is due to end on 20 January 2014 so that it ends on 2 February 2014

C) She can shorten or extend either of the two anniversary dates so that their end dates coincide

D) She is not allowed to make changes to either of the anniversary dates

QUESTION FIVE

Edward’s maximum income under capped drawdown was last reviewed on 30 September 2011. However, he is due to reach age 75 on 20 February 2014. The latest date upon which he has to have his maximum income next needs to be re-calculated is:

A) 20 February 2014, ie on attaining age 75

B) 30 September 2014, ie on the first anniversary after attaining age 75

C) 20 February 2015, ie on attaining age 76

D) 30 September 2016, ie once the current 5-year review period has expired

_________

Answers

1 C
2 B
3 A
4 C
5 B

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