ACCA F6 : Taxation And Pension Contributions! Trivia Quiz

1. Two types of pension are Personal Pension and __________ Pension.

Job

Work

Occupational

Professional

Explanation: Pension purchased privately by an individual, whether employed, self-employed or else, is called Personal Pension Scheme. Pension arrangement created by the employer is known as Occupational Pension.

Explanation

Explanation: Pension purchased privately by an individual, whether employed, self-employed or else, is called Personal Pension Scheme. Pension arrangement created by the employer is known as Occupational Pension.

2. An individual can contribute in __________ pension scheme(s) subject to certain limits.

More than one

Only One

Less than one

Explanation: An individual can actually contribute towards more than one pension schemes.

Explanation

Explanation: An individual can actually contribute towards more than one pension schemes.

3. Annual allowance (maximum amount that can be contributed each year) for £2011/12 is:

£25,000

£50,000

£75,000

£ 80,000

Explanation: Maximum pension contributions in a tax year are £50,000 for tax year 2011/12. Unused limit can be carried forward to 3 years.

Explanation

Explanation: Maximum pension contributions in a tax year are £50,000 for tax year 2011/12. Unused limit can be carried forward to 3 years.

4. The minimum amount of pension contributions that can be made by anyone (less than 75) is:

£1,000

£2,500

£3,600

£10,000

Explanation: Anyone can make pension contributions up to £3,600.

Explanation

Explanation: Anyone can make pension contributions up to £3,600.

5. Relevant earnings, in respect of an individual for pension contributions, is broadly:

Employment Income, Trading Income and Furnished Holiday Lettings

Employment Income, Trading Income and Rental Income

Employment Income, Trading Income and Patent & Royalties

Employment Income, Trading Income and Dividends

Explanation: Relevant earnings broadly comprise of Employment & Trading Income and Income from Furnished Holiday Lettings.

Explanation

Explanation: Relevant earnings broadly comprise of Employment & Trading Income and Income from Furnished Holiday Lettings.

6. Trow made £5,000 contributions in excess of the annual allowance who is additional rate taxpayer. The treatment of the excess of contribution over the annual allowance is:

£5,000 will be considered as non-savings income and he will pay tax on the same

There will be no additional tax payable

£5,000 will be reduced from the non-savings income

£5,000 will be deducted from the annual allowance of next year

Explanation: Excess contributions are added in non-savings income and are taxed accordingly.

Explanation

Explanation: Excess contributions are added in non-savings income and are taxed accordingly.

7. Romeo earned £10,000 from his employment, £5,000 from self-employment, £2,000 gross from dividends and £3,000 net from Building Society Interest. The maximum contribution that attracts tax relief is:

£3,600

£10,000

£15,000

£20,000

Explanation: Maximum pension contributions attracting tax relief is greater of £3,600 or relevant earnings which are income from employment, self-employment and furnished holiday lettings. In this case, it is 10,000 + 5,000 = £15,000.

Explanation

Explanation: Maximum pension contributions attracting tax relief is greater of £3,600 or relevant earnings which are income from employment, self-employment and furnished holiday lettings. In this case, it is 10,000 + 5,000 = £15,000.

8. If a person with relevant earnings of £15,000 pays £10,000 to an HMRC approved pension scheme (personal); his pension fund will increase by:

£3,600

£10,000

£12,500

£15,000

Explanation: Payment up to the higher of relevant earnings or £3,600 is deemed to be made net of 20%. Hence, in this case, the person pays £10,000 and will be considered to be paying net off basic rate tax. Hence his fund will increase by £12,500 that is 10,000 X 100/80.

Explanation

Explanation: Payment up to the higher of relevant earnings or £3,600 is deemed to be made net of 20%. Hence, in this case, the person pays £10,000 and will be considered to be paying net off basic rate tax. Hence his fund will increase by £12,500 that is 10,000 X 100/80.

9. Pension fund can be utilized when a person reaches the age of:

45

55

65

75

Explanation: Pension funds can be used when the person reaches the age of 55.

Explanation

Explanation: Pension funds can be used when the person reaches the age of 55.

10. _______________ is also known as Money Purchase Scheme.

Personal Pension

Occupational Pension

Defined Benefit

Defined Contribution

Explanation: Occupational Pension Scheme could be Defined Benefit or Defined Contribution scheme (Money Purchase Scheme). Defined benefit (also known as final salary scheme) is a scheme where employee contributes a part of his earnings and the benefits are based on the final salary being drawn by an employee. Money purchase/ defined contribution scheme builds the contributions over years and these are returned to the pensioner based on the performance of investment and total contribution.

Explanation

Explanation: Occupational Pension Scheme could be Defined Benefit or Defined Contribution scheme (Money Purchase Scheme). Defined benefit (also known as final salary scheme) is a scheme where employee contributes a part of his earnings and the benefits are based on the final salary being drawn by an employee. Money purchase/ defined contribution scheme builds the contributions over years and these are returned to the pensioner based on the performance of investment and total contribution.

11. If the pension fund exceeds annual allowance at the time benefit is started (vested), the excess over £1,800,000 will give rise to:

Excess being penalized at 10%

55% taxed if excess value withdrawn

25% taxed if excess value withdrawn

All taxed at 10%

Explanation: If the pension fund exceeds £1,800,000 when “vested”, the excess is charged at 55% if funds are withdrawn and 25% if funds are left in scheme to provide annuity.

Explanation

Explanation: If the pension fund exceeds £1,800,000 when “vested”, the excess is charged at 55% if funds are withdrawn and 25% if funds are left in scheme to provide annuity.

12. Tax relievable pension contributions can be made by a person under the age of:

55

65

75

85

Explanation: Pension contributions can be made by a person aged less than 75 years of age.

Explanation

Explanation: Pension contributions can be made by a person aged less than 75 years of age.

13. George contributed £30,000, £40,000, £50,000 and £60,000 gross personal pension contributions in the tax years 2007/08, 2008/09, 2009/10 and 2010/11. What is the maximum contribution the person can make in 2011/12 attracting tax relief?

£40,000

£50,000

£60,000

£70,000

Explanation: Annual allowance can be carried forward to a maximum of three years. Unused allowance for 2007/08 can be carried forward to 2008/09, 2009/10 and 2010/11. The excess of £2010/11 will be covered by the unused allowance of £2007/08. For 2011/12, the unused allowance for 2008/09 can be used which is £10,000. Hence the total is 50,000 + 10,000 = £60,000.

Explanation

Explanation: Annual allowance can be carried forward to a maximum of three years. Unused allowance for 2007/08 can be carried forward to 2008/09, 2009/10 and 2010/11. The excess of £2010/11 will be covered by the unused allowance of £2007/08. For 2011/12, the unused allowance for 2008/09 can be used which is £10,000. Hence the total is 50,000 + 10,000 = £60,000.

14. Lifetime allowance for 2011/12 is:

£1,000,000

£1,400,000

£1,800,000

£2,200,000

Explanation: Lifetime allowance is £1,800,000.

Explanation

Explanation: Lifetime allowance is £1,800,000.