R04 Tax treatment of member benefits: free practice questions

1. Question 1 of 5

   From 6 April 2028, what will the normal minimum pension age become?

   Option A: 56Option B: 60Option C: 58Option D: 57

   Show answer

   The answer is D: 57

   The Finance Act 2022 raises the normal minimum pension age from 55 to 57 from 6 April 2028, alongside State Pension age reaching 67.

   Why the other options are wrong

   A

   There's no intermediate step to 56.

   B

   60 isn't the legislated age.

   C

   58 isn't the legislated age.

2. Question 2 of 5

   Which statement about a serious ill-health lump sum is correct?

   Option A: It can only be paid from uncrystallised fundsOption B: It can only be paid if the member is over 75Option C: It is tested against the LSA but not the LSDBAOption D: It is limited to 25% of the fund

   Show answer

   The answer is A: It can only be paid from uncrystallised funds

   It needs life expectancy under a year and comes only from uncrystallised funds. It's tested against the LSDBA if paid before 75, with no limit on the amount.

   Why the other options are wrong

   B

   Under 75 it is tax-free up to the LSDBA; over 75 it is taxable.

   C

   It uses the LSDBA, not the LSA.

   D

   There's no 25% limit.

3. Question 3 of 5

   What is the maximum PCLS for a member with no protection?

   Option A: 25% of the benefits, whatever the member's allowancesOption B: The higher of 25% of the benefits and the member's available LSAOption C: The member's available LSA, whatever the size of the benefitsOption D: The lowest of 25% of benefits, available LSA and available LSDBA

   Show answer

   The answer is D: The lowest of 25% of benefits, available LSA and available LSDBA

   The PCLS is capped at the lower of the applicable amount (25% of the capital value), the available LSA and the available LSDBA.

   Why the other options are wrong

   A

   The member's remaining allowances also cap it.

   B

   It's the lower figure, not the higher.

   C

   25% of the benefits caps it too.

4. Question 4 of 5

   Which statement about a small pots payment is correct?

   Option A: It must be worth £30,000 or less in totalOption B: It uses no LSA and doesn't trigger the MPAAOption C: It is always paid fully tax-free to the memberOption D: The member needs some LSA left to take one

   Show answer

   The answer is B: It uses no LSA and doesn't trigger the MPAA

   A small pot is £10,000 or less. It isn't an RBCE, needs no LSA and doesn't trigger the MPAA. From uncrystallised funds 25% is tax-free.

   Why the other options are wrong

   A

   The small pots limit is £10,000.

   C

   Only 25% is tax-free, and nothing from crystallised funds.

   D

   No LSA or LSDBA is needed.

5. Question 5 of 5

   Is taking a pension income, such as a lifetime annuity, an RBCE?

   Option A: No; only tax-free lump sums are testedOption B: Yes; 25% of the income each year is tested against the LSAOption C: Only if the income exceeds £100,000 a year in totalOption D: Yes; the annuity purchase price is tested against the LSDBA

   Show answer

   The answer is A: No; only tax-free lump sums are tested

   Income isn't an RBCE. There's no limit on the funds used for income; only tax-free lump sums are limited.

   Why the other options are wrong

   B

   Income isn't tested against the LSA.

   C

   There's no income threshold.

   D

   The annuity purchase isn't tested.

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