Friday Five Focus on Pensions – 24 March – 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. Rory, an additional rate taxpayer, has been given a refund of his employee pension contributions after leaving his company within six months of joining their defined benefit pension scheme. He receives a lump sum payment of £12,000. How much tax, if any, has been paid by the scheme administrator?
   1. None, Rory declares £12,000 through self-assessment and pays tax at 45%
   2. £3,000
   3. £9,818
   4. None, Rory declares £12,000 through self-assessment form and pays tax at 20%

2. Shakil has crystallised funds in a flexi-access drawdown (FAD) pension. In relation to potential death benefits, he should be aware that: (Tick all that apply.)
   1. someone who isn’t a dependant can continue in FAD.
   2. the fund can be returned tax-free where Shakil 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. Under auto-enrolment rules, an employer must automatically enrol which of the following workers into a qualifying pension scheme?
   1. Florence who is aged 21 and earns £9,000.
   2. Joseph who is aged 69 and earns £12,000 per year working part time.
   3. Nancy who is aged 25 and earns £30,000 per year working full time.
   4. Kush who earns £100 per week working part time.

4. 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.

5. Based on Ali’s objectives and attitude to investment risk, a financial adviser has recommended he purchase a lifetime annuity with the accumulated fund of his Stakeholder pension. Under HMRC rules, Ali should be aware that the annuity can: (Tick all that apply.)
   1. be payable annually in arrears.
   2. provide a survivor pension, no greater than 50% of the member’s pension.
   3. be payable for a maximum period of 10 years.
   4. include an annuity protection capital lump sum.

Answers

1. B – See R04 Study Text, Chp 5
   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. C – See R04 Study Text, Chp 1/4
   Grab our taster mock exam paper for CII R04. Click here to download.

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

5. AD – See R04 Study Text, Chp 7
   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.