New Manual for CII R04 – What’s New, in a Nutshell
Anyone studying for the CII R04 Pensions and Retirement exam will have received a new manual from the CII dated December 2015. J05 was also similarly updated. Here, we let you know the main area that was changed in the new version of the manual, and we bring to your attention the changes to the section on small pots payments that were made in October 2015.
Changes to the Taxation of Trivial Commutation Lump Sum Death Benefits
The main area that has been updated is the section describing the way that trivial commutation lump sum death benefits are taxed – in all cases now the lump sum payment is taxed as the recipient’s income under PAYE.
Paul is aged 69 and has died whilst receiving a lifetime annuity with a 10-year guarantee. The payments left under the guarantee amount to £25,000. This is less than £30,000 so it can be commuted as a lump sum. If Paul’s sister is the nominated beneficiary and she is a higher rate taxpayer already, then she will receive £25,000 less 40% – in other words £15,000.
Changes to Small Pots Payments
For those who missed the CII Web Update Number 4, the section on small pots payments has ALSO been updated to cover the fact that these payments are not tested against the member’s lifetime allowance as they are not benefit crystallisation events, and the member does not need to have any lifetime allowance remaining to take a small pots commutation.
Remember that if a small pots payment is made in respect of uncrystallised benefits, 25% of the payment is tax free and 75% of the payment is taxed as the member’s pension income under PAYE. If the payment is made in respect of crystallised benefits, all of it is taxed as the member’s pension income under PAYE.
Finally references to the ‘pot follows member’ automatic transfer system have been deleted, in particular Section D1 of Chapter 5.
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Over to You…
Were you surprised to receive a whole new manual from the CII only a few months after the issue of the last version?