Friday Five Focus on Pensions – 12 February – 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 2020/21, examinable by the CII until 31 August 2021.

1. In considering ISAs as a means of building up funds for retirement, your client should be aware that: Tick all that apply.
   1. tax relief is available at basic rate.
   2. equity ISA funds have the same tax treatment as a pension fund.
   3. ISAs may not provide the maximum savings input that a high earner may desire.
   4. there is no need to purchase an annuity or secure an income.

2. Debbie has a basic salary of £40,000 and benefits in kind totalling £7,500 per annum. Debbie’s employer contributes 5% of her basic salary to her pension and Debbie tops this up with a contribution of 8% of her total relevant UK earnings. What is the total gross contribution being made to her pension plan?
   1. £4,640
   2. £5,850
   3. £6,175
   4. £5,800

3. When considering pension sharing on divorce, which of the following cannot be shared?
   1. Additional voluntary contributions
   2. The State Second Pension (S2P)
   3. Public sector schemes
   4. The new State Pension

4. The lifetime allowance is reduced by a percentage for each year before normal pension age that someone (who was entitled to a special low retirement age prior to ’A’ day) is taking benefits after 6 April 2006?
   1. 10%
   2. 5%
   3. 3.5%
   4. 2.5%

5. John began receiving his State pension in January 2016; he now wishes to defer the income and later take the benefit as a lump sum. He should be aware that: Tick all that apply.
   1. the rate of interest payable in deferral is 2.5% above bank base rate.
   2. John must defer benefits for at least one year.
   3. it is too late as State payments have already started.
   4. the lump sum will be taxed at the same rate as his other income..

Answers

1. BCD – See R04 Study Text, Chp 10
   Grab our taster mock exam paper for CII R04. Click here to download.

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

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

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

5. BD – See R04 Study Text, Chp 9
   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.