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

1. Flo entered into a capped drawdown contract in December 2014. Her financial adviser should be aware that the GAD rates used for calculating the basis amount and the maximum income for Flo are based on gilt yields and a notional annuity which is (Tick all that apply.)
   1. level in payment.
   2. payable monthly in advance.
   3. guaranteed for 10 years.
   4. single life.

2. Martin is about to retire. He has the following pension arrangements:
   

   Scheme	Value
   Occupational defined benefit	£5,000 p.a.
   Group personal pension	£12,000
   Self-invested personal pension	£8,000

   He is looking to take the benefits from his personal pensions as lump sums. He may take them as
   1. two small pots lump sums
   2. a small pots lump sum and a trivial commutation lump sum
   3. a trivial commutation lump sum and an uncrystallised funds pension lump sum (UFPLS)
   4. a small pots lump sum and an uncrystallised funds pension lump sum

3. The Trustees of a defined benefit pension scheme have developed a recovery plan for the scheme. This would indicate that the scheme
   1. is in deficit.
   2. was contracted out of the State Second Pension (S2P).
   3. has been taken over by the Pension Protection Fund (PPF).
   4. is changing the benefit structure.

4. Having opted for flexi-access drawdown your client will draw income which is paid
   1. as earned income via PAYE.
   2. free of any income tax.
   3. gross but taxable via self-assessment.
   4. as part capital (tax free) and part interest (taxable).

5. A Statutory Money Purchase Illustration (SMPI) for a married person/civil partner requires benefits to be projected to scheme retirement age, taking into account what level of compulsory spouse’s/civil partner’s pension?
   1. It is compulsory for a spouse’s/civil partner’s pension not to be included.
   2. It is compulsory to include a 50% spouse’s/civil partner’s pension.
   3. It is compulsory to include a 100% spouse’s/civil partner’s pension.
   4. The inclusion of a spouse’s/civil partner’s pension is at the provider’s discretion.

Answers

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

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

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

4. A – 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 6
   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.