Friday Five Focus on Pensions – 10 September – 5 Questions in 5 Minutes

Friday Five Focus on Pensions – 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 Pensions; this is useful as you prepare for the CII’s R04, AF7, or J05 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 2021/22, examinable by the CII until 31 August 2022.

1. Which of the following is a correct statement regarding ‘in-specie’ contributions?
   1. They are pension contributions in the form of an asset such as shares.
   2. The rules only apply to pension contributions of over £10,000.
   3. The scheme administrator recovers 40% tax from HM Revenue & Customs (HMRC).
   4. They can only be made to unapproved schemes.

2. In addition to defined contribution pension rights, Frank enjoys the benefits of an employer-sponsored group permanent health insurance (PHI) plan. Should Frank become disabled:
   1. his pension scheme membership will continue.
   2. tax relief on pension contributions will be available up to £3,600 per annum.
   3. any PHI income will be paid tax-free.
   4. the defined contribution pension is effectively made “paid up” for the duration of Frank’s illness.

3. In making your client aware of pension contribution insurance (PCI) on his newly established defined contribution pension scheme, you correctly advise him that: Tick all that apply.
   1. premiums will be eligible for tax relief.
   2. in the event of illness, the PCI will make contributions to the client’s scheme.
   3. both member and employer contributions can be covered.
   4. payments will begin after an agreed deferred period.

4. Having opted for flexi-access drawdown your client will draw income which is paid:
   1. as earned income via PAYE.
   2. tax-free.
   3. gross but taxable via self-assessment.
   4. as part capital (tax-free) and part interest (taxable)

5. A small, self-administered scheme (SSAS) is considering making a loan to its sponsoring employer. The scheme administrator should be aware that HMRC require that the loan: Tick all that apply.
   1. is no more than 50% of the net value of the scheme assets, excluding any monies transferred into the SSAS from previous pension arrangements.
   2. is secured as a first charge.
   3. is repaid in equal instalments over a five-year period.
   4. can be rolled over for a further period (not exceeding five years) if the sponsoring employer has financial difficulties.

Answers

1. A – See R04 Study Text, Chp 6
   Grab our taster mock exam paper for CII R04. Click here to download.

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

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

4. A – See R04 Study Text, Chp 3
   Grab our taster mock exam paper for CII R04 Click here to download.

5. BCD – See R04 Study Text, Chp 10
   Grab our taster mock exam paper for CII R04. 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?

If you found this quiz useful for your CII exam revision, please do share it with your colleagues.