Friday Five Focus on Pensions – 15 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 2023/24, examinable by the CII until 31 August 2024.

1. Mary is receiving an income under an earmarking order. How will this be taxed?
   1. On the member at the basic rate of income tax.
   2. On the member at their highest marginal rate of income tax.
   3. On Mary at the basic rate of income tax.
   4. On Mary at her highest marginal rate of income tax.

2. Simon has a self-invested personal pension (SIPP) as he likes to make his own investment decisions. Simon should be aware that this allows him to use the plan as (Tick all that apply).
   1. a route to invest in commercial property.
   2. a way of making loans to his limited company.
   3. a platform to operate income withdrawals through flexi-access drawdown.
   4. funding for his buy-to-let properties.

3. Kamil has been advised that he will be subject to a reduced annual allowance rather than the full £60,000. This is because he has
   1. net income of £290,000.
   2. adjusted income of £275,000.
   3. threshold income of £180,000.
   4. gross income of £235,000.

4. Bob is aged 67. He receives the following payments during the 2023/24 tax year
   

   Salary	£200,000
   DB pension commencement lump sum	£60,000
   Scheme pension	£50,000
   Non-flexible lifetime annuity	£25,000

   Bob’s annual allowance for the year will be:
   1. £60,000
   2. £52,500
   3. £22,500
   4. £10,000

5. Brian has just reached his normal retirement age of 63 and is about to take benefits from his defined benefit 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.
   

   1/60th final salary accrual rate

   3/80ths PCLS definition

   15:1 commutation factor

   £30,000 final pensionable remuneration

   24 years of pensionable service

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

Answers

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

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

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

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

5. C – 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.