Friday Five – 3 July 2015 – 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.

Good luck!

Questions
These questions relate to examinable tax year 2014/15, examinable until 31 August 2015.

1. What is the difference between a lifetime mortgage and a home reversion scheme?
   1. Monthly payments are typically lower under a home reversion scheme
   2. Under a home reversion scheme you sell all or part of your home, but under a lifetime mortgage you take out a loan secured on your home
   3. You can borrow a higher percentage of the value of your home under a lifetime mortgage
   4. Ownership of the home is retained by the client under a lifetime mortgage, but not under a home reversion scheme

2. Which type of risk cannot be eliminated?
   1. Non-systematic
   2. Systematic
   3. Investment specific
   4. Company specific

3. Paul is a beneficiary under the family Interest in Possession trust. He has a personal income of £153,000 and has recently also received £2,000 income generated from one of the trust’s building society investments. What is Paul’s Income tax liability on this income?
   1. His liability is 40% of the gross income of £2,500
   2. He has no liability as the trustees are responsible for any Income tax
   3. His liability is 45% of £2,500 less the 20% tax deducted at source
   4. He has no liability as 20% income tax has been deducted at source

4. In the event of death when the member has crystallised funds under a drawdown pension, in relation to the death benefits: – tick all that apply
   1. The dependant can continue drawdown pension.
   2. The fund can be returned less a 35% tax charge.
   3. The fund can be returned less a 55% tax charge.
   4. The dependant may be able to purchase a scheme pension.
   5. The whole of the non-protected rights element can be returned free of tax.

5. Matthew has surrendered an offshore life assurance policy. What rate, or rates, of income tax will he be liable for on any chargeable gain?
   1. Higher or additional rates only
   2. Basic rate only
   3. Basic rate, higher rate or additional rate
   4. Any gain will be free of income tax

Answers

1. B – See R01 Study Text, Chp 2 Section B2D
   Grab our taster mock exam paper for CII R01. Click here to download.

2. B – See J10 Study Text, Chp 3 Section A
   Grab out taster mock exam paper for CII J10. Click here to download.

3. C – See R03 Study Text, Chp 1 Section K4B
   Grab our taster mock exam paper for CII R03. Click here to download.

4. ACD – See R04 Study Text, Chp 6.2 Section E2A
   Grab our taster mock exam paper for CII R04. Click here to download.

5. C – See R05 Study Text, Chp 5 Section B1
   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?

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

This post was brought to you by Brand Financial Training