Friday Five – 12 June – 5 Questions in 5 Minutes

Welcome to this week’s Friday Five – 5 Questions in 5 Minutes Every Friday

What’s this all about?

It’s a bit of Friday Fun where we provide you with 5 questions relevant to a mix of CII exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT!  These questions relate to examinable tax year 2019/20, examinable by the CII until 31 August 2020.  They do not relate to tax year 2020/21 which is only examinable by the CII from 1 September 2020.

1. When recommending a product, it is important that its suitability is discussed. Each of the following would normally be discussed at this stage, with the exception of:
   1. the remuneration for the adviser.
   2. the term of the product.
   3. affordability.
   4. the tax treatment and investment risk of the product.

2. A buy-to-let investor should be aware that liquidity is a drawback of property investment because property: Tick all that apply.
   1. is difficult to value.
   2. is only available across a narrow type range.
   3. is expensive to trade.
   4. can be difficult to sell.

3. Susan has owned shares in an Enterprise Investment Scheme for the last 4 years. She has asked you what will happen on the eventual disposal of the shares when they were bought by reinvesting a capital gain. You can tell her that:
   1. any gain on the shares is CGT exempt, but the original gain is still taxable.
   2. only the gain on the EIS shares will potentially be liable to CGT.
   3. both the gain on the shares and the original gain are exempt from CGT.
   4. if the gain was reinvested within 1 year of the disposal, then all gains are exempt.

4. Which of the following statements are true regarding critical yield? Tick all that apply.
   1. There is no explicit regulatory requirement to produce critical yields on a drawdown illustration.
   2. Type A critical yield is the growth rate needed to provide an income equal to that under an equivalent immediate annuity.
   3. Type B illustrations must be accompanied by a type A illustration.
   4. Type B illustrations must show annuity purchase at ages 70 and 75.

5. Which of the following statements relating to the personal independence payment is true?
   1. It is a taxable benefit.
   2. It is a means-tested benefit.
   3. Eligibility is based on an assessment of individual need.
   4. Eligibility is based on the claimant’s NI contribution history.

Answers

1. A – See R01 Study Text, Chp 8
   Grab our taster mock exam paper for CII R01. Click here to download.

2. CD – See R02 Study Text, Chp 1:2
   Grab our taster mock exam paper for CII R02. Click here to download.

3. A – See R03 Study Text, Chp 12
   Grab our taster mock exam paper for CII R03. Click here to download.

4. ABC – See R04 Study Text, Chp 6:2
   Grab our taster mock exam paper for CII R04 Click here to download.

5. C – See R05 Study Text, Chp 3
   Grab our taster mock exam paper for CII R05. Click here to download.

How did you find this week’s questions? Did you complete them in 5 minutes? Did you get them all correct? Do you disagree with any?

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