Friday Five Focus on Pensions – 19 November – 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. Fred has a conventional lifetime annuity. Fred should be aware that the income he receives could fall compared to that paid in a previous year if he: Tick all that apply.
   1. has just married.
   2. chose a with profit annuity at outset.
   3. chose an annuity linked to RPI.
   4. has reached the end of the guarantee period.

2. Faraz is considering recycling excess pension income as further pension contributions. He should be aware that: Tick all that apply.
   1. this will fall foul of the recycling anti-avoidance provisions.
   2. it could increase lump sum death benefits if Faraz doesn’t have lifetime allowance issues.
   3. it creates a further source of pension commencement lump sum (PCLS).
   4. recycling anti-avoidance provisions only apply to a PCLS.

3. Bob registered his £1.65m pension fund for primary protection. Assuming he draws all his benefits in 2021/22, he will be entitled to a personal lifetime allowance of:
   1. £1.25million.
   2. £1.65million.
   3. £1.98million.
   4. £1.8million.

4. At A-day, Don’s total benefits were valued at £2m and he had entitlement to £600,000 of this in the form a pension commencement lump sum. Don registered for enhanced protection. Drawing benefits in 2021/22 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. For someone in a defined benefit scheme who reaches State pension age after 6 April 2016, what will happen to any contracted-out entitlement built up before that date?
   1. It is treated the same as the member’s ordinary rights under the DB scheme.
   2. A ‘rebate derived amount’ would have been applied to the starting amount.
   3. There will be changes to requisite benefits once the State pension is received.
   4. It remains as it was prior to the end of contracting out with the associated rights and employer obligations unchanged.

Answers

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

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

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