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The Technical Quiz: 22 August

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

The following questions all relate to capped drawdown pensions.

QUESTION 1: Andy commenced a drawdown pension in November 2012 taking 100% of the then GAD rate based upon a rounded down Gilt Yield of 2.00%. His fund has performed well and he is looking to increase the maximum income he takes from his pension as soon as possible. The earliest he can increase his income and the maximum income he can take at that time will be

A) Immediately his request for a member nominated review is accepted by the scheme administrator. The maximum income will be 120% of the maximum income calculated back in November 2012.

B) Immediately his request for a member nominated review is accepted by the scheme administrator. The maximum income will be 120% of the maximum income calculated at the date of the member nominated review and based upon his age, the fund value and the rounded down Gilt yield at that time.

C) November 2013. The maximum income will be 120% of the maximum income calculated back in November 2012.

D) November 2013. The maximum income will be 120% of the maximum income calculated at the date of the member nominated review and based upon his age, the fund value and the rounded down Gilt yield at that time.

QUESTION 2: Barry commenced capped drawdown on 15 September 2012 when the rounded down yield for 15 year UK gilts from the FTSE UK Gilt Indices was at an historic low of 2.00%. 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 September 2013, subject to obtaining the agreement of the scheme administrator.

C) On the next drawdown year anniversary, ie 15 September 2013, with no requirement to obtain agreement of the scheme administrator.

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

QUESTION 3: Charles commenced capped drawdown on 6 July 2012 and only took his PCLS having decided not to take any drawdown pension income in the first drawdown pension year. Early on in the second drawdown year he has decided to draw the maximum income, and has also asked if it is possible to draw some or all of the income he did not take during his first drawdown year. You tell him that:

A) No, it is not possible to do this. The maximum income that can be taken under capped drawdown in this 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 4: Dee attained age 75 in March 2013 with two capped drawdown arrangements under her scheme, with year-end anniversary dates, of 20 October and 2 February respectively. She is looking, if possible, to align these and her options are

A) She can only shorten the drawdown year that is due to end on 2 February 2014 so that it ends on 20 October 2013.

B) She can only extend the drawdown year that is due to end on 20 October 2013 so that it ends on 2 February 2014.

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

D) She is not allowed to make changes to either of the anniversary dates of her drawdown arrangements.

QUESTION 5: Edward’s maximum income under capped drawdown was last reviewed on 30 December 2012. However, he is due to reach age 75 on 20 November 2013. When will his maximum income next need to be re-calculated?

A) 20 November 2013, ie on attaining age 75.

B) 30 December 2013, ie on the first anniversary after attaining age 75.

C) 20 November 2014, ie on attaining age 76.

D) 30 December 2015, ie once the current triennial review period has expired.

Questions supplied by Technical Connection

_________

Answers

1 D
2 B
3 A
4 C
5 B

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