Friday Five – 16 September – 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

These questions relate to examinable tax year 2016/17, examinable until 31 August 2017.

1. What are the rules regarding a firm taking out insurance indemnity itself for FCA penalties or enforcement costs?
   1. A firm cannot indemnify itself against any FCA penalties, costs or enforcement action
   2. A firm can only indemnify itself against a financial penalty imposed by the FCA
   3. A firm cannot indemnify itself against an FCA penalty, but it can against the cost of defending enforcement action or costs it may be ordered to pay
   4. A firm can only indemnify itself against any FCA costs it may be ordered to pay

2. Amanda is considering a future transfer of her son’s Child Trust Fund to a Junior ISA. She should be aware that: Tick all that apply
   1. the tax position of the fund is the same for both products
   2. her son can withdraw the proceeds when he reaches 18
   3. payments are cumulative so can be made up in later years
   4. income generated of more than £100 will be taxed on her

3. At retirement, Bernice decides to buy a With Profit annuity. She selects an anticipated bonus rate of 5%. The same year, the provider declares a bonus rate less than this figure. The effect this has on the level of annuity payment she receives is that it will:
   1. increase after 12 months.
   2. decrease immediately.
   3. decrease the following year.
   4. have no effect.

4. Kelsey, a fund manager with a medium-sized investment firm in the city, has decided to take a significant divergence from his fund’s benchmark and gone overweight in emerging markets. What could this mean?
   1. It would suggest Kelsey is seeking out-performance and represents an opportunity for further investment into the fund
   2. Kelsey is an effective fund manager and this is evidence the fund is actively managed
   3. Kelsey is adopting a contrarian approach to fund selection
   4. The divergence represents greater risk so greater short-term volatility would be expected in Kelsey’s fund

5. Glenda needs to go into residential care following a stroke although she has been told that in a year or so’s time she may have recovered sufficiently to return home to her house valued at £250,000, which she is very attached to. She needs to release some funds to help fund her care – which of the following would not be suitable in these circumstances?
   1. Lifetime mortgage with drawdown
   2. Borrow from relatives
   3. Short term letting of the house
   4. Home Reversion Plan

Answers

1. C – See R01 Study Text, Chp 5:2, Section F3A
   Grab our taster mock exam paper for CII R01. Click here to download.

2. AB – See R03 Study Text, Chp 12, Section B3B/C
   Grab our taster mock exam paper for CII R03. Click here to download.

3. C – See R04 Study Text, Chp 6:1, Section C2H
   Grab our taster mock exam paper for CII R04. Click here to download.

4. D – See J10 Study Text, Chp 3, Section C2
   Grab our taster mock exam paper for CII J10. Click here to download.

5. D – See ER1 Study Text, Chp 5, Section I
   Grab our taster mock exam paper for CII ER1. 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?

Do let us know by leaving a comment below – we promise to read them all. (Humour particularly appreciated on a Friday!)