Friday Five Focus on Pensions – 16 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 2020/21, examinable by the CII until 31 August 2021.

1. A significant reason for the fall in annuity rates over recent years has been:
   1. an increase in equity yield projections.
   2. an increase in long-term gilt yields.
   3. a decrease in equity yield projections.
   4. a decrease in gilt yields.

2. Being “fit and proper” to undertake the role is a test that could be used by the Pension Regulator in assessing the appropriateness of the:
   1. Scheme Administrator.
   2. Scheme Trustee.
   3. Employer.
   4. Scheme Actuary.

3. Sam is a member of his employer’s defined benefit pension scheme which has a normal retirement age of 65. Scheme details are:
   

   1/60th accrual rate

   24 years’ service at early retirement date

   Final salary of £15,000

   Early retirement factor of 0.5% per month

   If Sam is retiring exactly 2 years earlier than the scheme’s normal retirement age, his pension will be:
   1. £6,000 p.a.
   2. £5,280 p.a
   3. £6,500 p.a.
   4. £5,720 p.a.

4. At A-day, Don’s total benefits were valued at £2m and he had entitlement to £600,000 of this in the form of a pension commencement lump sum. Don registered for enhanced protection. Drawing benefits in 2020/21 with an increased fund of £2.6m will provide him with a PCLS of:
   1. £312,500.
   2. £600,000.
   3. £720,000.
   4. £780,000.

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

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

3. B – See R04 Study Text, Chp 5
   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. 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.