Friday Five – 21 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 2018/19, examinable until 31 August 2019.

1. How does the use of trusts help mitigate an IHT liability?
   1. Trusts ensure that assets are paid in accordance with the donor’s wishes thereby avoiding IHT
   2. Placing investments in trust can reduce the value of the estate
   3. A regular premium life policy in trust allows clients to use their nil rate band
   4. Single premium life policies placed in trust are immediately exempt from IHT

2. As a financial adviser, which of the following individuals would you advise if possible to pay Class 3 National Insurance Contributions? Tick all that apply.
   1. Jane, who took early retirement at 50 having established 32 years of NICs
   2. Peter, aged 67, with an inadequate NIC record to qualify for a full State pension
   3. Hayley, who is moving to Portugal for a year, after selling the UK-based business she owned for 10 years
   4. Mary, who has an incomplete NIC record after taking the last 2 years off to study

3. Which of the following risks would apply to the drawdown pension option your client is entering into? Tick all that apply.
   1. The underlying annuity rate will increase during period of deferral in drawdown.
   2. Potentially high charges for administration/reviews.
   3. The value of the fund can go down as well as up.
   4. Depletion of fund through high-income withdrawals.

4. John is paying regular monthly premiums on a life assurance policy to protect a potential inheritance tax liability. Which of the following exemptions from inheritance tax could he claim against the annual premiums totalling £3,200?
   1. The annual exemption and the normal expenditure out of income
   2. The annual exemption only
   3. The small gifts exemption
   4. The life assurance premium exemption

5. What is the running yield of 5% Treasury Stock 2020 priced at £110.25?
   1. 2.21%
   2. 2.48%
   3. 4.54%
   4. 4.60%

Answers

1. B – See R01 Study Text, Chp 2
   Grab our taster mock exam paper for CII R01. Click here to download.

2. ACD – See R03 Study Text, Chp 2
   Grab our taster mock exam paper for CII R03. Click here to download.

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

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

5. C – See J10 Study Text, Chp 9
   Grab our taster mock exam paper for CII J10. 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!)