Friday Five Focus on Investments – 5 Questions in 5 Minutes – 18 Sep 2026

Friday Five Focus on Investments – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Investments; this is useful as you prepare for any of the CII’s R02, AF4, or J10 exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT! These questions relate to examinable tax year 2026/27, examinable by the CII until 31 August 2027.

1. Within a split capital investment trust, the “hurdle rate” is an indication of the
   1. capital and income return on a particular share until wind-up.
   2. annual growth rate investments must achieve to pay the current purchase price, the pre-determined redemption value, or the value at wind-up.
   3. ratio by which the predetermined redemption value for a class of shares is currently covered by those assets of the company that are available for them.
   4. annual percentage rate required to cover each share class at wind-up but based on growing only the equity portion of the portfolio.

2. George has made a gain from an open-ended investment company (OEIC) and from an onshore investment bond. It is important for him to realise that
   1. he can use his Capital Gains Tax exempt amount only against the OEIC gain.
   2. he may be able to utilise top-slicing relief against the OEIC gain.
   3. top-slicing relief is not available on onshore investment bond gains.
   4. he can use his Capital Gains Tax exempt amount only against the onshore investment bond gain.

3. Ryan and Mary have £165,000 held jointly in a deposit savings account. In the event of the institution becoming insolvent, how much could they expect to recover under the Financial Services Compensation Scheme (FSCS)?
   1. £85,000
   2. £117,000
   3. £165,000
   4. £240,000

4. Calder PL has issued four types of preference share; you would normally expect the shareholders to be ranked according to
   1. the date the investor purchased the shares, with the earliest having higher priority.
   2. the level of investment, with larger investors having higher priority.
   3. their priority for payment of dividends and entitlement to capital on wind-up.
   4. the number of preference shareholders compared to ordinary shareholders.

5. One result of an ageing UK population is that
   1. a declining proportion of wealth is spent on manufactured goods.
   2. there is lower average wealth due to increased longevity.
   3. demand for services diminishes as people become richer.
   4. gross domestic product (GDP) falls within the banking and insurance sectors.

Answers

1. B; See R02 Study Text, Chp 7; Rationale: Within a split capital investment trust, the hurdle rate indicates the annual growth rate the investment must achieve to pay the current purchase price, the pre-determined redemption value, or the value at wind-up.
2. A; See R02 Study Text, Chp 8/10; Rationale: Gains on OEICs are potentially subject to CGT so George can use his annual exempt amount if unused. Gains on investment bonds are potentially subject to Income Tax, and top-slicing may be available.
3. C; See R02 Study Text, Chp 1; Rationale: The Financial Services Compensation Scheme provides 100% compensation to investors (should an institution fail) of up to £120,000 of cash savings per institution. If an account is in joint names, each individual is eligible to claim the full £120,000; therefore, Ryan and Mary could expect to recover the full £165,000.
4. C; See R02 Study Text, Chp 2; Rationale: Preference shares are generally ranked according to their priority for the payment of dividends and entitlement to capital on wind-up.
5. A; See R02 Study Text, Chp 3; Rationale: In an ageing population, people tend to accumulate higher than average wealth holdings, but the proportion of money spent on manufactured goods declines whilst the proportion spent on services such as tourism tends to increase, resulting in an increasing GDP in the services sector.

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