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The Technical Quiz: 20 June

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: Miriam is due to take benefits from her former employer’s 60ths DB Scheme. It has a commutation rate of 12:1. Her pension entitlement before commutation is £24,000. Assuming the scheme rules permit her to take a PCLS of up to 25% of the value of the benefits she is drawing, the maximum PCLS she could take would be:

A) £54,500

B) £103,809

C) £121,110

D) £151,388

QUESTION TWO: Catrina took early retirement from the NHS and drew her pension and PCLS. Subsequently she was re-employed by the NHS resulting in her NHS pension being reduced under the abatement rules. How will the abatement (reduction) impact upon the PCLS that she took on her original retirement?

A) It will have no impact

B) The PCLS will need to be refunded, although once her pension increases to its original value the PCLS can be taken once again

C) The extent to which the lump sum exceeded 25% of the value of her reduced pension rights will be treated as an unauthorised member payment

D) The extent to which the lump sum exceeded 25% of the value of her reduced pension rights will be treated as an unauthorised member payment; however, there will be no scheme sanction charge

QUESTION THREE: David can take either a pension of £60,000 pa, or a PCLS of £140,000 and a reduced pension of £46,000 pa from his former employer’s DB Scheme. Assuming he decides to take the PCLS of £140,000 and a reduced pension of £46,000, the value of the crystallised rights for lifetime allowance purposes is:

A) £1,060,000

B) £1,200,000

C) £1,150,000

D) £1.290,000

QUESTION FOUR: Under a DB Scheme, the PCLS can be taken

A) In a period 12 months prior to, or 6 months after entitlement to the PCLS arises

B) In a period 6 months prior to, or 12 months after entitlement to the PCLS arises

C) In a period up to 12 months after entitlement to the PCLS arises

D) Only on the date when the entitlement to the PCLS arises

 

QUESTION FIVE: Robin is a member of a DB Scheme, whose rules permit him to take a PCLS of up to three times the amount of the initial pension he is drawing. If this amount is less than the maximum PCLS available under HMRC rules, Robin can:

A) Not take a larger lump sum as this would be contrary to the scheme rules

B) Insist upon the scheme offering him the maximum PCLS as the HMRC legislation is overriding

C) Only take the additional amount as a lump sum taxed at his highest marginal rate of income tax

D) Only take the additional amount as a lump sum taxed at 55%

Questions supplied by Technical Connection

_________

Answers

1 D
2 A
3 A
4 B
5 A

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