Friday Five – 29 December – 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. Why has the FCA devised rules regarding client assets and client money?
   1. To minimise the risk of clients’ money being used by the firm without agreement
   2. To ensure the firm can identify the correct level of money for each client
   3. So the firm can show it has taken the appropriate level of risk with each asset
   4. To ensure that all cheques are banked within prescribed timescales

2. An OEIC differs from a unit trust because an OEIC: Tick all that apply.
   1. issues annual audited accounts
   2. may be a stand-alone fund or an umbrella company
   3. can meet the costs of creation from the fund
   4. does not require an independent depositary

3. Susan is considering purchasing unit trusts and OEICs. She should be aware that: Tick all that apply.
   1. Both products are exempt from Capital Gains Tax in the hands of the investor
   2. She will be buying units in the unit trust and shares in the OEIC
   3. Both unit trusts and OEICs are classed as collective investments
   4. Dividends from both products are paid gross

4. Why might an employer decide to provide death in service benefits through a separate insured scheme as opposed to through a defined benefit scheme?
   1. To maintain death in service benefits without draining the fund.
   2. To treat the death in service benefits as an allowable expense.
   3. If the employees were all below 45.
   4. As the defined benefit scheme is fairly large.

5. Don, who has never been married or had children, has recently sold his property for £500,000 before moving into residential care – he has no other assets and does not have sufficient income to fund all of his care costs. How could an Immediate Needs annuity be advantageous for Inheritance Tax (IHT) planning purposes?
   1. Because it includes life assurance cover which could help meet the IHT liability
   2. Because the purchase of the annuity is a Potentially Exempt Transfer (PET) for IHT purposes
   3. An immediate needs annuity with a purchase price of £175,000 or more would reduce his total estate to less than the IHT nil rate band of £325,000 removing any potential IHT liability
   4. Because the premiums would be covered by the “out of normal expenditure” exemption

Answers

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

2. ABC – See R02 Study Text, Chp 6:1
   Grab our taster mock exam paper for CII R02. Click here to download.

3. BCD – See R03 Study Text, Chp 10
   Grab our taster mock exam paper for CII R03. Click here to download.

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

5. C – See CF8 Study Text, Chp 8
   Grab our taster mock exam paper for CII CF8. 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!)