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Exam question:
Rosie was employed for several years. She got promoted and was paid gross director’s remuneration of £220,000 in tax year 2018/19
2015/16 made gross pension contribution of £15,000
2016/17 made gross pension contribution of £21,000
2017/18 made gross pension ontribution of £0.Rosie was member of a pension scheme in tax year 2017/18.
Calculate total pension scheme AA available in tax year 2018/19
– I know that the Annual Allowance (AA) is limited to £40,000 and that any unused AA from the previous 3 tax years can be carried forward, subject to the fact that in those tax years the individual was a member of the occupational pension scheme.
Q: Why then is it not just the £40,000 unused AA from 2017/18 c/f which was when she was the member of a pension scheme, and why does the previous years (2015/16, 2016/17) unused AA get carried forward as well when clearly, in the question it only says that Rosie was a member of the pension scheme in 2016/17?
This is confusing me I dont know if this is an error or some trick as its all paid gross personal pension contributions.
(I summarised the question)
Any help in this matter would be greatly appreciated.
Thank you.
There is no trick meant here but unfortunately the line put into the question to actually help students has in fact caused confusion – which I assure you was not their intention.
You have assumed that the line “Rosie was a member of a pension scheme in tax year 2017/18” means that she was therefore NOT a member in 2015/16 and 2016/17 – you state “in the question it only says that Rosie was a member of the pension scheme in 2016/17 (it actually says 2017/18)”.
Your interpretation is wrong – in 2015/16 and 2016/17 you are told that contributions are made – therefore she MUST have been a member of the pension scheme in those years to have actually made contributions into it! Therefore unused AA is available.
The inclusion of the line about 2017/18 was intended to remove any doubt about whether she was STILL a member in that tax year and therefore unused AA would also be available for that year – it did not mean that she was ONLY a member for that year!
Hope this clarifiesThat really clarifies thank you!
Q. Just to further solidify my understanding, this may sound stupid,
but if it says gross ‘PERSONAL’ pension contribution then its always contribution into a personal pension scheme, and if it says ‘gross pension contribution’ it is ALWAYS contribution to an occupational pension scheme (i.e must have been a member of the occupational pension scheme then)?
Thank you
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