Friday Five Focus on Pensions – 17 February – 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. Desmond dies at the age of 68 in receipt of a scheme pension. If the scheme continues to pay an income after his death, his wife Debbie will receive a:
   1. dependant’s scheme pension paid tax-free.
   2. lifetime annuity paid tax-free.
   3. dependant’s scheme pension taxed as her pension income under PAYE.
   4. dependant’s lifetime annuity taxed as her pension income under PAYE

2. Following the death of her husband, Mary has been advised that she may commute the survivor’s pension from his defined benefit scheme for a lump sum. Mary however is considering forsaking it in favour of her niece. The rules relating to this specify that:
   1. the maximum that can be paid as a lump sum death benefit is £30,000 per scheme.
   2. the maximum lump sum commutable across all of her late husband’s schemes is £30,000.
   3. the lump sum payable is an uncrystallised funds pension lump sum (UFPLS).
   4. the lump sum can be paid to Mary’s niece as there are no restrictions on who can receive it.

3. Emilio is about to enter into a flexi-access drawdown contract. He should be aware that: (Tick all that apply.)
   1. any pension commencement lump sum must be taken at outset.
   2. the minimum income requirement for flexi-access drawdown is £10,000.
   3. taking more than the maximum permitted income will trigger the money purchase annual allowance.
   4. a flexi-access drawdown pension can take the form of a short-term annuity.

4. 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.
   

   1/60th final salary accrual rate

   3/80ths PCLS definition

   15:1 commutation factor

   £30,000 final pensionable remuneration

   24 years of pensionable service

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

5. Patryk has numerous sources of income. His financial adviser should be aware that relevant UK earnings for the purposes of investing in a UK-registered pension scheme include: (Tick all that apply.)
   1. income from a trade or profession.
   2. employment overtime and bonuses.
   3. rent from a buy-to-let property.
   4. income derived from the payment of equity dividends.

Answers

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

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

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

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

5. AB – See R04 Study Text, Chp 2
   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.