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You Can Never Do Enough Pension Questions!

You Can Never Do Enough Pension Questions!

THIS ARTICLE IS RELEVANT TO EXAMINABLE TAX YEAR 2019/20.

We’ve had quite a few pension queries over the past few weeks so we’ve set out below one of the typical questions we are asked regarding capped drawdown.

Question: Sally was in capped drawdown on 5 April 2015. She took the maximum PCLS from a fund that was worth £385,000.  Sally’s GAD rate is £53 per £1,000, what is the maximum income Sally is entitled to?

A    £15,304

B    £18,365

C    £22,956

D    £30,608

Answer: C  – CII R04 Study Text Cross Reference : Chapter 6.2, Section E1A

Rationale: Sally has taken the maximum PCLS (25% of her fund); therefore, her remaining fund invested into pension drawdown is £385,000 x 75% = £288,750. If Sally’s GAD rate is £53 per £1,000, applied to her fund this equates to £288,750/£1,000 x £53 = £15,303.75. The maximum income she can take in capped drawdown is 150% of GAD = £15,303.75 x 150% = £22,956 (rounded up).

For a free taster R04 mock paper go to  https://brandft.co.uk/cii-r04-ro4-pensions-and-retirement-planning-mock-exam-questions/#freetaster

We also have 3 full sets of mock questions plus a calculation workbook, study notes and audio masterclasses to help you through your  R04 exam. For more details go to: https://brandft.co.uk/cii-r04-ro4-pensions-and-retirement-planning/