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The Technical Quiz – Aug 23

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

Question 1
Under HMRC rules a scheme pension can be provided by

A) A defined benefit scheme only
B) A defined contribution scheme only
C) A defined benefit scheme and a SSAS only
D) Either a defined benefit scheme or a defined contribution scheme

Question 2
A BCE 3 occurs

A) where a scheme pension increases in payment above a prescribed level (i.e. normally the greater of 5% and RPI)
B) where a member attains age 75 with uncrystallised defined benefit rights
C) when a scheme pension commences to be paid from a defined contribution scheme
D) when a scheme pension commences to be paid from a defined benefit scheme

Question 3
David, who was in receipt of a scheme pension paid via a SSAS, died and a widow’s pension is to be paid by the scheme. The widow’s pension can be

A) only in the form of a scheme pension
B) in the form of a scheme pension or a lifetime annuity only
C) only in the form of a lifetime annuity paid via an insurance company
D) in the form of a scheme pension, a lifetime annuity or a drawdown pension

Question 4
A defined benefit scheme can offer the following lump sum death benefit options

A) a pension protection lump sum net of a 55% tax charge only
B) a 5-year guarantee with the option to commute for a tax-free lump sum
C) a potentially tax-free defined benefits lump sum death benefit only
D) either a pension protection lump sum net of a 55% tax charge or a potentially tax-free defined benefits lump sum death benefit

Question 05
Edwin has a SSAS valued at £2 million and has elected for fixed protection. . Assuming he takes his maximum PCLS, and uses his remaining fund to take a scheme pension from the SSAS where the rate of scheme pension paid is 4% of capital, his pension rights for lifetime allowance purposes will be valued as?

A) £1,600,000
B) £1,690,000
C) £1,700,000
D) £2,000,000

Questions supplied by Technical Conection

Answers:

1 D)
See RPSM09101210

2 A)
See RPSM11104342

3 D)
See RPSM09101330

4 D)
See RPSM09101330

5 B)
The maximum PCLS is the lower of 25% of the fund value crystallised or 25% of the lifetime allowance (in this case due to fixed protection that will be £450,000). That leaves a scheme pension to be provided from £1,550,000 of the SSAS funds, which based upon a 4% assumed annuity rate results in a scheme pension of £62,000 p.a. Based upon the 20:1 valuation factor that means the scheme pension is valued at £1,240,000 to which must be added the value of the PCLS of £450,000, giving the total of £1,690,000.

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