Friday Five Focus on Pensions – 13 January – 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 2022/23, examinable by the CII until 31 August 2023.

1. A self-employed individual can obtain higher rate tax relief on personal pension contributions by:
   1. reducing their first payment on account by the amount of tax relief.
   2. reducing their second payment on account by the amount of tax relief.
   3. reducing their balancing payment by the amount of the tax relief.
   4. paying the pension contributions net of higher rate tax.

2. Guaranteed minimum pension (GMP) benefits for members of contracted-out defined benefit schemes between April 1978 and April 1988 who reached State pension age before 6 April 2016 were:
   1. fully inflation proofed, paid entirely by the State.
   2. fully inflation proofed, with the State paying any RPI in excess of 3%.
   3. fully inflation proofed, paid entirely by the Scheme.
   4. inflation proofed, with the scheme paying up to a maximum of 2.5%.

3. Edward, who has no transitional protection, crystallises the benefits from his employer’s occupational pension scheme. Edward’s fund is valued at £500,000. He intends to take £125,000 as a pension commencement lump sum (PCLS) and use the remainder to buy an annuity. Alternatively, his employer would pay a scheme pension of £17,500, on top of the PCLS. If he takes the scheme pension, what is the value of benefits for lifetime allowance purposes?
   1. £350,000
   2. £475,000
   3. £525,000
   4. £550,000

4. Frank’s pension complaint has been accepted by the Financial Ombudsman Service for investigation because Frank believes:
   1. his State Pension forecast is incorrect.
   2. his pension plan was ill advised at inception 10 years ago.
   3. he was wrongly advised to transfer his pension.
   4. the information received from the trustees of his DB scheme is wrong.

5. Sally was in capped drawdown on 5 April 2015. She took the maximum PCLS from a fund that was worth £385,000. Sally’s GAD rate is £53 per £1,000, what is the maximum income Sally is entitled to?
   1. £15,304
   2. £18,365
   3. £22,956
   4. £30,608

Answers

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

2. A – See R04 Study Text, Chp 5
   Grab our taster mock exam paper for CII R04. Click here to download.

3. B – See R04 Study Text, Chp 7
   Grab our taster mock exam paper for CII R04. Click here to download.

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

5. C – See R04 Study Text, Chp 8
   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.