Friday Five Focus on Pensions – 15 October – 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 are correct statements regarding the regulation of Stakeholder pensions?
   1. The scheme must be registered with the Pensions Ombudsman.
   2. The Pensions Regulator is responsible for registration compliance.
   3. The ABI regulates the marketing of schemes.
   4. The Pensions Regulator supervises the fund manager.

2. Clare has a stakeholder pension invested in the default investment fund with a lifestyle arrangement. Clare should be aware that: Tick all that apply.
   1. switching begins between 15 and 20 years before Clare’s selected retirement age.
   2. as she approaches her selected retirement date her fund is moved away from riskier investments such as equities into more secure investments such as gilts.
   3. Clare will need to remember to switch her funds as her retirement date approaches.
   4. switching occurs at pre-set times and does not allow for market conditions.

3. State Pensions are funded on a ‘pay as you go’ basis. What does this mean?
   1. Revenue raised from income tax is used to pay for the State pensions of today.
   2. The current working population pay into their future National Employment Savings Trust (NEST) benefits.
   3. National insurance contributions of the current working population pay for State pensions of today.
   4. Revenue raised from all the forms of direct taxation is used to pay for State pensions of today.

4. At age 52, Craig has died before drawing any benefits from his registered pension schemes. His personal pension fund and lump sum death benefit from the plans total £1.75m in the 2021/22 tax year of death. Assuming all benefits are to be paid in the form of a cash lump sum, his widow can expect to receive a net amount of:
   1. £1,377,705
   2. £1,580,775
   3. £1,625,000
   4. £1,750,000

5. Brian has just reached his normal retirement age of 63 and is about to take benefits from his DB scheme. From the information below, calculate the reduced annual pension Brian will receive on the basis that he takes the maximum pension commencement lump sum.

1. 1. £10,200
   2. £12,000
   3. £1,800
   4. £9,000

Answers

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

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

3. C – See R04 Study Text, Chp 1
   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. A – See R04 Study Text, Chp 5
   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.