Friday Five – 22 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 2017/18, examinable until 31 August 2018.

1. At what point when dealing with life assurance is acceptance regarded as having taken place?
   1. On producing a quotation
   2. At the end of the cooling off period
   3. On receipt of the life office’s acceptance letter
   4. Payment of the first premium

2. Yellowstone’s accounts show that dividends paid to ordinary shareholders over the last 12 months was £315,000 whilst dividends paid to preference shareholders was £175,000. Their profit after taxation was £1,114,000. What is their dividend cover?
   1. 3.54 times
   2. 2.98 times
   3. 1.98 times
   4. 6.37 times

3. As an adviser, you have been asked to explain the Capital Gains Tax (CGT) implications for the trustees of a bare trust. You explain that: Tick all that apply.
   1. the trustees will be liable to CGT at a rate of 10%
   2. any chargeable gains are usually treated as the beneficiary’s
   3. the trustees will have a standard rate band of £1,000 to offset against gains
   4. the beneficiary is liable for any CGT and can use their full annual exempt amount

4. Stuart is aged 60 and still working in a freelance capacity as a music teacher earning a good level of income in addition to his pensions, he does not expect to fully retire for 15 years. He would like to release equity to improve his home, what type of mortgage is likely to be most suitable in his circumstances?
   1. Drawdown lifetime mortgage
   2. Conventional capital and interest mortgage over 15 years
   3. Shared Appreciation mortgage
   4. Lifetime mortgage with interest roll up

5. Ian has an executive pension plan with greater than 25% scheme specific tax-free cash entitlement. The fund is worth £800,000 and he has no lifetime allowance enhancement or any other pension benefits. If he wishes to receive the maximum tax-free lump sum, which of the following options would not be suitable?
   1. Taking the maximum pension commencement lump sum and purchasing a conventional lifetime annuity with the balance of the fund.
   2. Taking the maximum pension commencement lump sum and purchasing a flexible lifetime annuity with the balance of the fund.
   3. Taking the maximum pension commencement lump sum and designating the rest of the fund into flexi-access drawdown.
   4. Taking the entire fund as an uncrystallised funds pension lump sum.

Answers

1. D – See R01 Study Text, Chp 3
   Grab our taster mock exam paper for CII R01. Click here to download.

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

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

4. B – See ER1 Study Text, Chp 6
   Grab our taster mock exam paper for CII ER1. Click here to download.

5. D – See R08 Study Text, Chp 6
   Grab our taster mock exam paper for CII R08. 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!)