Friday Five Focus on Pensions – 13 May – 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. They do not relate to tax year 2022/23 which is only examinable by the CII from 1 September 2022.

1. Norman started flexible drawdown in June 2013. As a result of the rule changes on 6 April 2015, he should be aware that: Tick all that apply.
   1. his arrangement was converted to flexi-access drawdown.
   2. the money purchase annual allowance (MPAA) was triggered from the date of his first withdrawal after converting to flexi-access drawdown. 
   3. his position with regards to being able to make defined contribution pension contributions without incurring an annual allowance charge improved. 
   4. the automatic conversion into flexi-access drawdown was a benefit crystallisation event.

2. Annuity rates have fallen in recent years due to the fact that people are living for longer and also because of: 
   1. falling gilt yields.
   2. rising equity prices. 
   3. lower charges. 
   4. higher inflation.

3. Following divorce, an offset order is being applied to pension benefits from Clive’s defined benefit scheme. Which of the following would NOT apply? 
   1. A cash equivalent transfer value calculation will be made to establish the amount of offset. 
   2. Any offset calculation should take account of the possible income tax payable on any pension. 
   3. Re-marriage of the ex-spouse will terminate the offset order. 
   4. This will be a “clean break” arrangement. 

4. Pension input periods run from:
   1. 5 April – 6 April
   2. 1 March – 29 February
   3. 30 April – 29 March
   4. 6 April – 5 April

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. AC – See R04 Study Text, Chp 8/2
   Grab our taster mock exam paper for CII R04. Click here to download.

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

3. C – 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 2
   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.