AF7

Advanced Diploma in Financial Planning

Practice Test 3

Unit AF7 – Pension transfers

2022-2023 Revision Aid

Based on July 2020 examination

SPECIAL NOTICES

These revision questions have been put together by an experienced trainer to provide a prompt
for exam practice. However, please ensure that you bear in mind any changes to law, tax and
practice that may have taken place since publication or update.

Practice in answering the questions is highly desirable and should be considered a critical part
of a properly planned programme of examination preparation.
 AF7 Practice Test 3 2022-2023 Revision Aid

Unit AF7 – Pension transfers

Contents
Useful tips as you prepare for the AF7 exam 3
Question paper 4
Model answers 11
Tax tables 16
Supplementary Information Pension Paper 25

This PDF document is accessible through screen reader attachments to your web browser and has
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Published July 2022

Telephone: 020 8989 8464

Fax: 020 8530 3052
Email: [email protected]

Copyright © 2022 The Chartered Insurance Institute. All rights reserved.

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Useful tips as you prepare for the AF7 exam

1. Schedule sufficient revision time to use your notes and learning and support materials to
refresh your learning and consider how what you have learned applies to the case studies.

2. Familiarise yourself with the format and the navigation options navigation of an onscreen
written exam:

Familiarisation Test
Although the familiarisation test is modelled on AF1, the example is relevant for every
candidate preparing to sit on-screen written exams by remote invigilation. Whilst there might
be slight differences in layout, it will make you familiar with navigation and use of the
platform.

Follow these instructions to take the Familiarisation Test.

• Click here to access the Familiarisation Test.

• Once the test is open, click ‘start’.
• Explore the platform to practice navigation and general functionality.

3. Demonstration Test
If you will be taking your exam by remote invigilation you will also have access to a
demonstration test, allowing you to explore the invigilation platform and process (which is
different to MCQ exams such as units R01-5).

We strongly recommend that you schedule and take a demonstration test before the day of
your exam. You will be given the option to take a demonstration test when you receive your
exam login details in an email a week before your exam.

Taking the demonstration test will introduce you to the check-in process including a system
check, a photo ID check, a room scan, taking a user photo, entering your login details and
answering test questions. It can also indicate current system issues with your equipment with
time to resolve these before your exam.

4. The Assessment Information - Before the exam area of the CII website has further practical
information and support.

5. Prepare exam technique using the support of the Exam Guides on the AF7 unit page
https://shop.ciigroup.org/pension-transfers-af7--af7.html which include examiner guidance
and time-saving tips such as abbreviations.

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AF7
Advanced Diploma in Financial Planning
Practice Test 3

Unit AF7 – Pension transfers

SPECIAL NOTICES

All questions in this paper are based on English law and practice applicable in the tax year
2022/2023, unless stated otherwise and should be answered accordingly.

It should be assumed that all individuals are domiciled and resident in the UK unless
otherwise stated.

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Unit AF7 – Pension transfers

Instructions to candidates

Read the instructions below before answering any questions

• Two hours are allowed for this paper which carries a total of 100 marks as follows:

Section A: 33 marks
Section B: 67 marks

• You are strongly advised to attempt all questions to gain maximum possible marks.
The number of marks allocated to each question part is given next to the question and you
should spend your time in accordance with that allocation.

• Read carefully all questions and information provided before starting to answer. Your answer
will be marked strictly in accordance with the question set.

• You may find it helpful in some places to make rough notes in the answer booklet. If you do
this, you should cross through these notes before you hand in the booklet.

• It is important to show all steps in a calculation, even if you have used a calculator.

• If you bring a calculator into the examination room, it must be a silent, battery or
solar-powered, non-programmable calculator. The use of electronic equipment capable of
being programmed to hold alphabetic or numerical data and/or formulae is prohibited.
You may use a financial or scientific calculator, provided it meets these requirements.

• Tax tables are provided at the back of this question paper.

• Additional information relevant to pension planning is also included at the back of this
question paper.

• Answer each question on a new page and leave six lines blank after each question part.

Subject to providing sufficient detail you are advised to be as brief and concise as possible,
using note format and short sentences on separate lines wherever possible.

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SECTION A

The following questions are compulsory and carry a total of 33 marks

1. Outline the Financial Conduct Authority’s rules that must be followed when two
separate advisers work together to provide the defined benefit pension transfer
advice and, the advice on the proposed receiving scheme and its investments. (7)

2. Naseem, aged 42, has recently received a cash equivalent transfer value (CETV)
from a previous employer’s defined benefit pension scheme. The CETV has
changed in value since Naseem was last provided with a CETV two years ago. His
financial adviser has informed him that this may be due, in part, to the actuary
assuming a higher rate of future inflation.

Explain, in detail, how the higher assumed rate of future inflation would impact on
the calculation of Naseem’s CETV. (9)

3. George, aged 61, is married to Karen. You have prepared a lifetime cashflow
model for them in relation to the proposed transfer of the cash equivalent transfer
value of George’s defined benefit pension into a personal pension plan.

(a) Outline four benefits of using a lifetime cashflow model as part of the
advice process. (4)

(b) Explain why the lifetime cashflow model will need to be reviewed regularly. (5)

4. Outline the key factors that should be considered when assessing an individual’s
attitude to investment risk and outline why they are important. (8)

Total marks available for this question: 33

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SECTION B

All questions in this section are compulsory and carry an overall total of 67 marks

Case study 1

Read carefully all information provided in the case study before attempting the questions.
Your answers should take account of the client’s circumstances as set out in the case study.

William, aged 64, is married to Olivia, aged 61, and are both in good health. They have two sons,
aged 35 and 37, and four grandchildren aged between four and nine. Olivia’s parents are in their
mid-80s and in good health, however William’s parents both died in their mid-70s.

Olivia is a member of her company’s defined benefit pension scheme. She plans to retire and take
her benefits from the scheme when she reaches the age of 62, which is the scheme’s normal
pension age. The scheme will provide her with a pension commencement lump sum of £66,000
plus a scheme pension of £22,000 per annum gross.

William has been a member of his company’s defined benefit pension scheme, which was
contracted-out prior to 2016. He joined the scheme at the age of 21 and plans to retire when he
reaches the age of 65.

The details of William’s scheme are as follows:

Pre-commutation pension £46,000 per annum

Guarantee period 5 years (payable as income)
Spouse’s pension 50% of member’s pre-commutation pension
Increases to pension in payment Statutory minimum
Normal pension age 65
Cash equivalent transfer value (CETV) £1,220,000

When they reach their State Pension ages, William will receive a State Pension of £5,800 per
annum and Olivia will receive £6,700 per annum.

The couple’s investment portfolio is valued at £350,000 and includes an adequate emergency fund
as well as stocks and shares ISAs and equity-based unit trusts. Their home is valued at £950,000
and is mortgage free.

They require a joint net income of £2,500 per month to cover their day-to-day living expenses.
Once they reach their State Pension ages this income requirement will be covered by Olivia’s
scheme pension and their State Pensions.

William would like advice about whether to transfer his defined benefit pension scheme into a
personal pension plan in order to access his benefits flexibly. They would also like to make gifts to
help with their grandchildren’s future university costs and would like to provide a legacy for their
children. In view of these requirements, William plans to nominate Olivia and their two sons as
beneficiaries of the personal pension plan if a transfer is recommended.

Both William and Olivia have a balanced attitude to investment risk.

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Questions

5. Based on the information provided in the case study, list the factors you would
consider and outline their relevance when making a recommendation on the
potential transfer of the cash equivalent value of William’s defined benefit pension
scheme. (15)

6. State all the potential death benefit options and their tax treatment, if William
transfers his defined benefit pension scheme benefits to a personal pension plan in
order to access his benefits flexibly. (10)

7. You have recommended that William transfers the benefits from his defined
benefit pension scheme into a personal pension plan.

Compare the taxation implications of using the couple’s investment portfolio to

provide any income or capital requirements as opposed to taking funds from
William’s personal pension. (9)

Total marks available for this question: 34

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Case study 2

Read carefully all information provided in the case study before attempting the questions.
Your answers should take account of the client’s circumstances as set out in the case study.

Nisha, aged 47, is married to Sanjay, aged 48. They have two children aged 10 and 12.

Sanjay is a radiographer and has worked for the National Health Service (NHS) since August 1999.
His current salary is £48,000.

Nisha was recently made redundant and has decided to use her redundancy payment to fulfil her
long-term desire to start her own business making cakes for weddings and other special occasions.

Shortly after leaving her former employer, Nisha received a statement of entitlement in respect of
her defined benefit pension scheme membership which included the opportunity to take a cash
equivalent transfer value (CETV). The details are as follows:

Scheme service 1 September 1996 to 27 March 2021

Total pension at date of leaving £13,334 per annum
Spouse’s pension 50%
Increases in deferment RPI capped at 5% for all benefits
Increases to pension in payment Statutory minimum
Normal pension age 65
CETV £426,688

The scheme is underfunded, however the CETV is currently unreduced.

Nisha was pleasantly surprised by the amount of the CETV and is considering transferring these
benefits to a personal arrangement. She intends to buy a single life, fully inflation protected
annuity at age 60, on the basis that she believes Sanjay already has enough pension provision. She
is in excellent health with a family history of longevity.

Nisha has a cautious attitude to investment risk and would wish to utilise passive index tracking
funds to keep the annual management charges as low as possible, preferably 0.5% or lower.

In addition to their pension provision, Nisha and Sanjay’s only other assets are:

• their main residence, currently valued at £235,000 with an outstanding mortgage of £82,000;
• cash savings of £38,250 held in joint names which includes Nisha’s redundancy payment;
• a stocks and shares ISA in Nisha’s name, currently valued at £28,500.

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Questions

8. State the additional information that you would require from Nisha and Sanjay,
prior to advising Nisha on the suitability or otherwise of transferring the value of
her defined benefit pension scheme to a personal pension plan. (8)

9. Taking account of Nisha’s plans to purchase a lifetime annuity, as outlined in the

case study, explain why the results of a Transfer Value Comparator will be of
limited relevance in determining whether a transfer is suitable or not. (12)

10. List four potential benefits and four potential drawbacks of transferring the value
of her defined benefit pension scheme to a personal pension plan now rather than
when Nisha approaches age 60. (8)

11. Despite Nisha’s concerns about the scheme’s funding position, you have
recommended that Nisha leaves her benefits preserved in her former employer’s
defined benefit pension scheme.

Outline how Nisha’s benefits will be affected if the scheme enters the Pension
Protection Fund (PPF) before she reaches age 65. (5)

Total marks available for this question: 33

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NOTE ON MODEL ANSWERS

The model answers given are those which would achieve maximum marks. However, there are
alternative answers to some question parts which would also gain high marks. For the sake of
clarity and brevity not all the alternative answers are shown.

Model answer for Question 1

• Both advisers should have available the same information to be able to provide both the
pension transfer advice and investment advice.
• They should establish the attitude to investment risk, attitude to transfer risk and capacity
to loss along with their knowledge and past experience.
• The role of each adviser should be made clear, along with the respective adviser charging
structures and how to make a complaint to each adviser.

Model answer for Question 2

• Higher assumed revaluation leads to a higher revalued pension at normal retirement age.
• The escalation of Naseem’s pension in payment is assumed to be higher leading to a lower
assumed scheme annuity rate.
• Both above factors will lead to a higher capitalised value of benefits at normal retirement
age leading to a higher cash equivalent transfer value (CETV).
• Higher assumed equity returns lead to an increased discount rate in turn leading to a
reduced CETV.

Model answer for Question 3

(a) • Compares the level of income from the existing and proposed schemes and can help
demonstrates whether the client’s objectives can be met.
• Identifies any potential shortfalls and can help to consider income sustainability.
• Can help to confirm the level of risk the client needs to take and whether it is
appropriate.
• Allows various scenarios and circumstances to be illustrated and tested.

(b) • To consider the changing values of assets and actual investment returns.
• To consider any changes in personal or financial circumstances.
• To consider any changes to needs and objectives.
• To consider changes in underlying assumptions or legislation.
• To reconsider relevant stress tests.

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Model answer for Question 4

• Timescale – a longer timescale allows short-term fluctuations to be overcome.

• Pension as a proportion of overall wealth – if the proportion is small then a person may be
prepared to take more risk and may be a different level of risk to other assets.
• Past investment Experience – someone with a positive or extensive investment experience
may be prepared to take a higher degree of risk.
• Risk required to achieve goals – there may be no need to take as high a level of risk as the
person is prepared to take.

SECTION B

Case Study 1

Model answer for Question 5

• William has a balanced attitude to risk and the couple have both investment experience
and capacity for loss.
• William and Olivia are both in good health however William’s parents both died in their
mid-70s whereas Olivia’s parents are both alive and in their 80s.
• If William were to die early, he will not benefit from the Define Benefit (DB) scheme over
the longer term although it does provide a 50% spouses pension for Olivia.
• The couple’s objectives include leaving a legacy for their children and helping with the
grandchildren’s university costs.
• The children and grandchildren cannot benefit from the DB scheme however they can
benefit from the investment portfolio and property assets.
• The couple’s day to day living expenses can be met from Olivia’s scheme pension and their
State pensions with the Olivia’s pension commencement lump sum (PCLS) and the
investment portfolio being able to provide income during the period to State Pension Age.
• There would be a potential lifetime allowance charge following a transfer however there is
not likely to be one if benefits are drawn from the DB scheme.
• The DB scheme will escalate in line with Statutory Requirements only therefore not all
elements of the pension scheme will increase.

Model answer for Question 6

• Lump sum.
• Dependant’s or Nominees Annuity.
• Dependant’s or Nominees Drawdown.
• Any benefit taken from the uncrystallised funds before age 75 and within the two-year
window will be paid tax-free. There is no two-year window for crystalised funds.
• Any benefit taken after age 75 or outside of the two-year window will be paid tax-free.
There is no two-year window for crystalised funds.
• There will be a lifetime allowance test on death before age 75 in respect of any remaining
uncrystallised funds.
• The pension fund is not included in the estate for Inheritance Tax purposes.

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Model answer for Question 7

• Any income more than the personal allowance taken from the personal pension plan will be
taxed as earned income under PAYE.
• PCLS taken will be paid tax-free.
• If the withdrawals are not taken until after William’s death, they will be tax-free if William
dies before age 75.
• Tax-free funds can be taken from their ISAs.
• They can take capital withdrawals from their unit trusts which will be tax-free within the
Capital Gains Tax annual exemption.
• They can make use of their savings and dividend allowances.
• Taking funds from the investment portfolio will reduce their estate for Inheritance Tax
purposes.
• Taking pension withdrawals can reduce future lifetime allowance charges.

Case Study 2

Model answer for Question 8

• Expected income needs in retirement.

• Expected capital needs in retirement.
• Sanjay’s expected NHS pension.
• Sanjay’s expected retirement age.
• Sanjay’s health and life expectancy.
• Understanding of transfer risk.
• Do they expect and inheritances?
• Expected State Pensions.

Model answer for Question 9

• It assumes an annuity purchase based on the scheme benefit structure and includes a
spouse’s pension whereas Nisha intends to buy a single life pension.
• She requires full inflation protection which is not provided by the scheme.
• It is based on the normal scheme retirement age of 65 whereas she wants to retire at age
60.
• It has fixed assumption of 0.75% for product charges however she is likely to use a fund
with a lower charge.
• It includes a 4% annuity advice cost assumption however she intends to source her own
annuity therefore there will be no advice cost.
• The assumed ‘risk-free’ rate of return is not likely to be in line with the investments chosen.
• TVC assumes no PCLS is taken and she is likely to want to take some PCLS.
• It is based on standard ONS mortality however she is in excellent health and has a family
history of longevity.

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Model answer for Question 10

Benefits:
• Provides immediately higher lump sum death benefits.
• Potential for capital growth due to long term to drawing benefits.
• Could be used to support the business now e.g. property purchase with the fund.
• Transfer value could reduce in the future due to the underfunding.

Drawbacks:
• Ongoing charges and advice costs.
• Loss of high guaranteed revaluation.
• Not compatible with her attitude to risk.
• Irreversible decision and circumstances may change.

Model answer for Question 11

• Her pension will be reduced to 90% with no cap.

• Inflation in deferment reduces from RPI to CPI with post-2009 benefits capped at 2.5%.
• Escalation reduced to CPI capped at 2.5% for all post-1997 benefits.
• Spouse’s pension is reduced to 50% of the Pension Protection Fund income.

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The Tax Tables which follow are applicable to the examinations during
September 2022 to August 2023.

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INCOME TAX
RATES OF TAX 2021/2022 2022/2023
Starting rate for savings* 0% 0%
Basic rate 20% 20%
Higher rate 40% 40%
Additional rate 45% 45%
Starting-rate limit £5,000* £5,000*
Threshold of taxable income above which higher rate applies £37,700 £37,700
Threshold of taxable income above which additional rate applies £150,000 £150,000

Child benefit charge:

1% of benefit per £100 of adjusted net income between £50,000 – £60,000
*Only applicable to savings income that falls within the first £5,000 of income in excess of the personal
allowance

Dividend Allowance £2,000 £2,000

Dividend tax rates
Basic rate 7.5% 8.75%
Higher rate 32.5% 33.75%
Additional rate 38.1% 39.35%
Trusts
Standard rate band £1,000 £1,000
Rate applicable to trusts
- dividends 38.1% 39.35%
- other income 45% 45%
MAIN PERSONAL ALLOWANCES AND RELIEFS
Income limit for Personal Allowance § £100,000 £100,000
Personal Allowance (basic) § £12,570 £12,570

Married/civil partners (minimum) at 10% † £3,530 £3,640

Married/civil partners at 10% † £9,125 £9,415
Marriage Allowance £1,260 £1,260
Income limit for Married Couple’s Allowance† £30,400 £31,400
Rent a Room scheme – tax free income allowance £7,500 £7,500
Blind Person’s Allowance £2,520 £2,600
Enterprise Investment Scheme relief limit on £2,000,000 max** 30% 30%
Seed Enterprise Investment relief limit on £100,000 max 50% 50%
Venture Capital Trust relief limit on £200,000 max 30% 30%
§ the Personal Allowance reduces by £1 for every £2 of income above the income limit irrespective of age
(under the income threshold).
† where at least one spouse/civil partner was born before 6 April 1935.
** Investment above £1,000,000 must be in knowledge-intensive companies.

Child Tax Credit (CTC)

- Child element per child (maximum) £2,845 £2,935
- family element £545 £545
Threshold for tapered withdrawal of CTC £16,480 £17,005

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NATIONAL INSURANCE CONTRIBUTIONS

Class 1 Employee Weekly

Lower Earnings Limit (LEL) £123

Primary threshold £242*
Upper Earnings Limit (UEL) £967

Total earnings £ per week CLASS 1 EMPLOYEE CONTRIBUTIONS

Up to 242.00** Nil
242.00* – 967.00 13.25%
Above 967.00 3.25%

*£190 per week/£9,880 per annum before 6 July 2022.

**This is the primary threshold below which no NI contributions are payable. However, the lower earnings
limit is £123 per week. This £123 to £242* band is a zero-rate band introduced in order to protect lower
earners’ rights to contributory State benefits e.g. the New State Pension.

Total earnings £ per week CLASS 1 EMPLOYER CONTRIBUTIONS

Below 175.00*** Nil

175.00 – 967.00 15.05%
Excess over 967.00 N/A

*** Secondary earnings threshold.

Class 2 (self-employed) Flat rate per week £3.15 where profits exceed £6,725 per annum.
Class 3 (voluntary) Flat rate per week £15.85.
Class 4 (self-employed) 10.25% on profits between £11,908 – £50,270.
3.25% on profits above £50,270.

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PENSIONS
TAX YEAR LIFETIME ALLOWANCE
2006/2007 £1,500,000
2007/2008 £1,600,000
2008/2009 £1,650,000
2009/2010 £1,750,000
2010/2011 £1,800,000
2011/2012 £1,800,000
2012/2013 & 2013/2014 £1,500,000
2014/2015 & 2015/2016 £1,250,000
2016/2017 & 2017/2018 £1,000,000
2018/2019 £1,030,000
2019/2020 £1,055,000
2020/2021 – 2022/2023 £1,073,100
LIFETIME ALLOWANCE CHARGE
55% of excess over lifetime allowance if taken as a lump sum.
25% of excess over lifetime allowance if taken in the form of income.

ANNUAL ALLOWANCE
TAX YEAR ANNUAL ALLOWANCE
2014/2015 – 2022/2023 £40,000*
*Reducing by £1 for every £2 of ‘adjusted income’ over £240,000 to a minimum of £4,000 if ‘threshold
income’is also over £200,000.

MONEY PURCHASE ANNUAL ALLOWANCE 2021/2022 2022/2023

£4,000 £4,000

ANNUAL ALLOWANCE CHARGE

20% – 45% determined by the member’s taxable income and the amount of total pension input in
excess of the annual allowance or money purchase annual allowance.

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CAPITAL GAINS TAX

EXEMPTIONS 2021/2022 2022/2023

Individuals, estates etc £12,300 £12,300

Trusts generally £6,150 £6,150
Chattels proceeds (restricted to five thirds of proceeds exceeding limit) £6,000 £6,000
TAX RATES
Individuals:
Up to basic rate limit 10% 10%
Above basic rate limit 20% 20%
Surcharge for residential property and carried interest 8% 8%

Trustees and Personal Representatives 20% 20%

Business Asset Disposal Relief* – Gains taxed at: 10% 10%

Lifetime limit £1,000,000 £1,000,000
*For trading businesses and companies (minimum 5% employee or director shareholding) if held for at least
two years.

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INHERITANCE TAX
RATES OF TAX ON TRANSFERS 2021/2022 2022/2023
Transfers made on death
- Up to £325,000 Nil Nil
- Excess over £325,000 40% 40%

Transfers
- Lifetime transfers to and from certain trusts 20% 20%
A lower rate of 36% applies where at least 10% of deceased’s net estate is left to a registered charity.

MAIN EXEMPTION
Transfers to
- UK-domiciled spouse/civil partner No limit No limit
- non-UK-domiciled spouse/civil partner (from UK-domiciled spouse) £325,000 £325,000
- main residence nil rate band* £175,000 £175,000
- UK-registered charities No limit No limit
*Available for estates up to £2,000,000 and then tapered at the rate of £1 for every £2 in excess until
fully extinguished.

Lifetime transfers
- Annual exemption per donor £3,000 £3,000
- Small gifts exemption £250 £250
Wedding/civil partnership gifts by
- parent £5,000 £5,000
- grandparent/bride and/or groom £2,500 £2,500
- other person £1,000 £1,000

100% relief: businesses, unlisted/AIM companies, certain farmland/building

50% relief: certain other business assets

Reduced tax charge on gifts within 7 years of death:

- Years before death 0-3 3-4 4-5 5-6 6-7
- Inheritance Tax payable 100% 80% 60% 40% 20%

Quick succession relief:

- Years since IHT paid 0-1 1-2 2-3 3-4 4-5
- Inheritance Tax relief 100% 80% 60% 40% 20%

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PRIVATE VEHICLES USED FOR WORK

2021/2022 Rates 2022/2023 Rates

Cars
On the first 10,000 business miles in tax year 45p per mile 45p per mile
Each business mile above 10,000 business miles 25p per mile 25p per mile
Motorcycles 24p per mile 24p per mile
Bicycles 20p per mile 20p per mile

MAIN CAPITAL AND OTHER ALLOWANCES

2021/2022 2022/2023

Plant & machinery (excluding cars) 100% annual investment allowance

(first year) £1,000,000 £1,000,000

Plant & machinery* first year allowance for companies to 31/3/2023: Super-deduction 130%
Special rate 50%

Plant & machinery (reducing balance) per annum 18% 18%

Patent rights & know-how (reducing balance) per annum 25% 25%
Certain long-life assets, integral features of buildings (reducing balance)
per annum 6% 6%
Energy & water-efficient equipment 100% 100%
Zero emission goods vehicles (new) 100% 100%
Electric charging points 100% 100%
Qualifying flat conversions, business premises & renovations 100% 100%

Motor cars: Expenditure on or after 1 April 2016 (Corporation Tax) or 6 April 2016 (Income Tax)
CO2 emissions of g/km: 0* 1-50 Over 50
Capital allowance: 100% 18% 6%
first year reducing balance reducing balance
*If new and unused

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MAIN SOCIAL SECURITY BENEFITS

2021/2022 2022/2023
£ £
Child Benefit First child 21.15 21.80
Subsequent children 14.00 14.45
Guardian’s allowance 18.00 18.55

Employment and Support Assessment Phase

Allowance
Age 16 - 24 Up to 59.20 Up to £61.05
Aged 25 or over Up to 74.70 Up to £77.00

Main Phase
Work Related Activity Group Up to 104.40 Up to 107.60
Support Group Up to 114.10 Up to 117.60

Attendance Allowance Lower rate 60.00 61.85

Higher rate 89.60 92.40

Basic State Pension Single 137.60 141.85

Married 275.20 283.70

New State Pension Single 179.60 185.15

Pension Credit Single person standard minimum

guarantee 177.10 182.60
Married couple standard minimum
guarantee 270.30 278.70
Maximum savings ignored in
calculating income 10,000.00 10,000.00

Bereavement Support Payment Higher rate – First payment 3,500.00 3,500.00

Higher rate – monthly payment 350.00 350.00
Lower rate – First payment 2,500.00 2,500.00
Lower rate – monthly payment 100.00 100.00

Jobseeker’s Allowance Age 18 - 24 59.20 61.05

Age 25 or over 74.70 77.00

Statutory Maternity, Paternity

and Adoption Pay 151.97 156.66

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CORPORATION TAX
2021/2022 2022/2023

Standard rate 19% 19%

VALUE ADDED TAX

2021/2022 2022/2023

Standard rate 20% 20%

Annual registration threshold £85,000 £85,000
Deregistration threshold £83,000 £83,000

STAMP DUTY LAND TAX

Residential
Value up to £125,000 0%
£125,001 - £250,000 2%
£250,001 - £925,000 5%
£925,001 - £1,500,000 10%
£1,500,001 and over 12%
Additional SDLT rules still apply as below:
Stamp Duty Land Tax (SDLT) is payable in England and Northern Ireland only. Land Transaction Tax
(LTT) is payable in Wales and Land and Buildings Transaction Tax (LBTT) is payable in Scotland. The
rates for LTT and LBTT are different to the rates shown above.

Additional SDLT of 3% may apply to the purchase of additional residential properties purchased for
£40,000 or greater.

SDLT may be charged at 15% on interests in residential dwellings costing more than £500,000
purchased by certain corporate bodies or non-natural persons.

First-time buyers benefit from SDLT relief on purchases up to £500,000 when purchasing their main
residence. On purchases up to £300,000, no SDLT is payable. On purchases between £300,000 and
£500,000, a flat rate of 5% is charged on the balance above £300,000.

Non residential
Value up to £150,000 0%
£150,001 and £250,000 2%
£250,001 and over 5%

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The additional information for the pension paper can be found on pages 25 – 26

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 AF7 Practice Test 3 2022-2023 Revision Aid

SUPPLEMENTARY INFORMATION PENSION PAPERS – AF7 2022/2023

REVALUATION

Guaranteed Minimum Pension – Fixed rate

Date of leaving service Fixed rate of revaluation

Before 6 April 1988 8.5%
Between 6 April 1988 and 5 April 1993 7.5%
Between 6 April 1993 and 5 April 1997 7.0%
Between 6 April 1997 and 5 April 2002 6.25%
Between 6 April 2002 and 5 April 2007 4.5%
Between 6 April 2007 and 5 April 2012 4.0%
Between 6 April 2012 and 5 April 2017 4.75%
Between 6 April 2017 and 5 April 2022 3.5%
After 5 April 2022 3.25%

Non GMP benefits – statutory minimum rates

Date of leaving service Statutory rate of revaluation

Before 1 January 1986 No requirement to revalue benefits
Between 1 January 1986 and CPI capped at 5% in respect of non GMP benefits accrued
31 December 1990 from 1 January 1985
Between 1 January 1991 and CPI capped at 5% in respect of all non GMP benefits
5 April 2009
After 5 April 2009 CPI capped at 5% in respect of all non GMP benefits accrued
before 6 April 2009
CPI capped at 2.5% in respect of all benefits accrued after 5
April 2009
NOTE: Statutory revaluation is based on RPI for revaluation prior to 2011

ESCALATION

Statutory rates of escalation: Member reached State Pension age before 6 April 2016

Accrual Statutory rate of escalation

GMP: Accrual prior to 6 April 1988 Scheme: No requirement to provide any increases in
payment
State: Fully in line with CPI
GMP: Accrual between 6 April 1988 and Scheme: CPI capped at 3%
5 April 1997 State: Any increases in CPI in excess of 3%
Non GMP: Accrual prior to 6 April 1997 Scheme: No requirement to increase in payment
Non GMP: Accrual between 6 April 1997 Scheme: CPI capped at 5% (LPI)
and 5 April 2005
Non GMP: Accrual from 6 April 2005 Scheme: CPI capped at 2.5%
NOTE: Statutory escalation was based on RPI prior to 2011

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Statutory rates of escalation: Member reaches State Pension age on or after 6 April 2016

Accrual Statutory rate of escalation

GMP: Accrual prior to 6 April 1988 Scheme: No requirement to provide any increases in payment
GMP: Accrual between Scheme: CPI capped at 3%
6 April 1988 and 5 April 1997
Non GMP: Accrual prior to Scheme: No requirement to increase in payment
6 April 1997
Non GMP: Accrual between Scheme: CPI capped at 5% (LPI)
6 April 1997 and 5 April 2005
Non GMP: Accrual from Scheme: CPI capped at 2.5%
6 April 2005
NOTE: No increase to GMP is made by the State (via the State Pension) for individuals who reach
State Pension age on or after 6 April 2016

PENSION PROTECTION FUND

Compensation cap no longer applies following a Court of Appeal ruling in July 2021 that it was
unlawful on the grounds of age discrimination.

Revaluation of deferred benefits within PPF

Service Rate of revaluation

All service before 6 April 2009 CPI capped at 5%
All service after 5 April 2009 CPI capped at 2.5%

Escalation of benefits in payment from PPF

Service Rate of revaluation

All service before 6 April 1997 No increases
All service after 5 April 1997 CPI capped at 2.5%

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