Friday Five Focus on Pensions – 2 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 2023/24, examinable by the CII until 31 August 2024.

1. A self-employed individual can obtain higher rate tax relief on personal pension contributions by
   1. reducing their first payment on account by the amount of tax relief.
   2. reducing their second payment on account by the amount of tax relief.
   3. reducing their balancing payment by the amount of the tax relief.
   4. paying the pension contributions net of higher rate tax.

2. A pension in payment from a defined benefit scheme must escalate in line with CPI to a maximum of 2.5% for service
   1. before 6 April 1978.
   2. after 5 April 2005.
   3. before 5 April 1997.
   4. after 5 April 1997.

3. 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.

4. Kim is 60 and has no taxable income in 2023/24. She has a personal pension valued at £300,000 and she decides to take £40,000 of this fund as an uncrystallised funds pension lump sum (UFPLS). What is the net payment that Kim will receive?
   1. £30,000
   2. £32,000
   3. £36,384
   4. £36,514

5. Saving for retirement through the use of a registered pension scheme provides your client with which of the following incentives?
   1. Half of the fund may be taken as a tax-free cash lump sum.
   2. Benefits available from age 50.
   3. Simplicity and ease of understanding.
   4. Tax relief for the member and any employer.

Answers

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

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

3. A – See R04 Study Text, Chp 7
   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. D – See R04 Study Text, Chp 1
   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.