APT·PENSIONS-LAW · Module 2: Pensions Law, Regulation and Scheme Design·UnitPENSIONS-LAW · Unit 03Access: Premium
Unit 2.3: Tax, State Pensions, Automatic Enrolment and Scheme Design
Unit 2.3 gathers the parts of the syllabus that shape how a scheme is built and what it costs. It covers the tax treatment of registered pension schemes and the allowances that apply to members, the interface between state pensions and occupational provision, the requirement for employers to offer a qualifying scheme and enrol their workers automatically, the member-nominated trustee and director requirements, and the design of defined benefit and defined contribution schemes with the differences that follow from each. Tax figures change from one Budget to the next, so check current allowances against HMRC before relying on a number you have memorised.
What’s in it.
5 topics- Topic 01
Taxation
39 questions - Topic 02
The State Pensions / Occupational Pensions Interface
45 questions - Topic 03
The Requirement for Employers to Offer a Qualifying Scheme for All Employees from 2012
44 questions - Topic 04
Member-Nominated Trustee / Director Requirements
42 questions - Topic 05
The Design of DB and DC Schemes
44 questions
Sample questions
3 of manyA few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.
A DC member's employer pays £5,000 into their pot during the tax year, the member pays £2,000 net under relief at source (grossed up to £2,500), and the pot grows by £1,200 in investment returns. What is the member's pension input amount for Annual Allowance purposes?
- £5,000, being only the employer contribution.
- £7,500, the total employer and grossed-up member contributions.Correct answer
- £2,500, being only the grossed-up member contribution.
- £8,700, being contributions plus investment growth for the year.
ExplanationThe DC pension input amount is the sum of contributions paid into the pot during the tax year, here £5,000 employer plus £2,500 grossed-up member contribution, totalling £7,500. Investment growth is not counted, and the factor of 16 is used for DB pension input amounts, not DC. Key takeaway: only contributions paid in the year count toward a DC pension input amount, not investment performance.
A member has a standard Annual Allowance of £60,000 for the 2026/27 tax year, no tapering, and £15,000 of unused allowance carried forward from prior years. Their pension input amount for 2026/27 is £70,000. Which outcome follows?
- An Annual Allowance charge arises on £55,000, because only the standard allowance for the current year can be used.
- An Annual Allowance charge arises on £70,000, because carry forward only applies to the Money Purchase Annual Allowance.
- No Annual Allowance charge arises, because the £70,000 pension input amount is fully covered by £60,000 plus the £15,000 carried forward.Correct answer
- An Annual Allowance charge arises on £10,000, because carry forward cannot be combined with the standard allowance in the same year.
ExplanationCarry forward allows unused Annual Allowance from the three preceding tax years to be added to the current year's standard allowance, provided the individual was a member of a registered scheme in those years. Here, £60,000 plus £15,000 of carry forward gives £75,000 of available allowance, comfortably covering the £70,000 pension input amount, so no charge arises. Key takeaway: carry forward genuinely increases the allowance available in the current year, it is not restricted to MPAA scenarios.
A member takes their PCLS and moves the rest of their DC pot into flexi-access drawdown but has not yet drawn any income. A second member takes an UFPLS from a small separate pot. Which statement correctly distinguishes their MPAA position?
- Both members have avoided triggering the MPAA, since both actions fall under the small pot exception.
- The first member's MPAA status depends on the size of the pot moved into drawdown, while the second member is unaffected.
- The first member has not triggered the MPAA; the second has, since an UFPLS is a flexible access event and undrawn drawdown is not.Correct answer
- Neither member has triggered the MPAA, since neither has withdrawn taxable income from drawdown specifically.
ExplanationThe PCLS-then-undrawn-drawdown route does not trigger the MPAA, since no taxable income has been withdrawn. An UFPLS, by contrast, is itself a flexible access event and triggers the MPAA on payment. Key takeaway: the specific method of access, not merely touching a DC pot, determines whether the MPAA is triggered.