Friday Five Focus on Pensions – 20 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 2020/21, examinable by the CII until 31 August 2021.

1. Alan used his £300,000 pension fund to buy a pension protected annuity. The annuity was £18,000 p.a. payable annually in arrears. Alan died age 72, having received 12 payments to that point. The annuity protection lump sum his dependants would receive is:
   1. £54,600.
   2. £84,000.
   3. £37,800.
   4. £126,900.

2. In relation to death benefits, when the member has crystallised funds under flexi-access drawdown (FAD) pension, which of the following is true? Tick all that apply.
   1. Someone who isn’t a dependant can continue in FAD.
   2. The fund can be returned tax-free where the member dies after age 75.
   3. If there are no dependants, the beneficiary can leave the fund on their death to charity.
   4. The beneficiary can leave the FAD fund on their death to a successor.

3. Kim is 60 and has no taxable income in 2020/21. 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. £36,370
   4. £36,500

4. Bob crystallises his two pension plans in the year 2020/21. Based on the information below, what will the lifetime allowance charge be if Bob draws the excess as a cash lump sum?
   

   Final salary scheme pension of £50,000 plus a tax-free cash sum of £100,000

   Personal pension of £550,000, all of which is being used to purchase an immediate lifetime annuity.

   1. Nil
   2. £144,225
   3. £317,295
   4. £454,795

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

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

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

4. C – See R04 Study Text, Chp 2
   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.