CII 2025

Employers have to auto enrol people who are what

• 22-SPA

• Earning minimum £10,000

Auto enrollment Only applies to employers who have a contract with a worker

what part of capped drawdown is tested against LSDBA

25 x the maximum permitted annual income

Tax inside SIPP

• No income tax

• No CGT

On investments held within pension

Tax treatment for trusts on death after 75

Death Before 75 = no tax when put in trust

Death after 75:

Taxed at special LSDB charge = 45%

Maximum years can receive income on short term annuity

5 years

DB dependents pension tax rules

Only the before 75 applies to DC

For DB its taxed at marginal rate regardless of age at death

If someone stops receiving earmarking - what would cause income to stop

Remarrying

If you’re below scheme pension age when the scheme enters pension protection fund. What do you get

90% of accrued benefits

What assumptions are used for TVC’s

When recommending transferring from a DB scheme need to use a TVC

Assumptions:

• Product charge will be 0.4%

• Retirement at NRD

• FCA growth rates

Mortality drag

The loss you suffer in drawdown because you’re not pooling your money with people who die early

• People dying early subsidises people who live longer

Increases post 70

Annuity protection

If you die early you get back original purchase price

• As a lump sum

Take off all income received from this lump sum

Annuity protection example

£750/month

48 monthly instalments

Annuity bought for £120,000

£750 × 48 months = £36,000 total paid to client

£120,000 - £36,000 =£84,000.00

How does pension payment increase each year

The higher of:

• Earnings

• Inflation

• 2.5%

How where you live affects your state pension

If you live in UK:

• SP increases with triple lock

If you live abroad:

• SP is frozen

What does OMO apply to

Applies to DC pensions

Does not apply to DB pensions

Trust based scheme characteristics

• Trustees choose investments

• Net Pay is used (conts taken before tax)

• Charge caps in place

Advantage to Relief at source

Ensures all employees benefit from TR

• Basic TR is added automatically

• Even non-taxpayers get 20%

DB death benefits (member dies before retirement)

• Will be based on deceased pensionable salary at death

• May cease if client remarries (varies)

• Usually around 50% of pension but sometimes more

Small pots rules

• can’t partially small pot - all benefits must be commuted

• SP’s are a special exception from RBCE

• Max it can be is £10,000

PP - max 3 pots

Occ - unlimited

Trivial commutation

Allows someone to cash all pension right as a lump sum

• Max £30,000

• Must be 55+

• Must commute all

Once you take first trivial comm payment you have 12 months to cash everything

25% TFC

75% Taxable

Critical yield

The investment return needed from a drawdown fund to match what an annuity would have paid

Takes into account additional costs of capped drawdown

Link between lifestyling and annuities

As retirement approaches:

• The fund moves into bonds

Bonds move opposite to annuity Rates so:

• Annuity rates fall = Bond Value rises

• Annuity rates rise = Bond Value falls

Works well if you bought an annuity alongside being in lifestyling as if 1 is down the other will be up