Friday Five Focus on Pensions – 28 April – 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. They do not relate to tax year 2023/24 which is only examinable by the CII from 1 September 2023.

1. At retirement, Bernice decides to buy a With Profit annuity. She selects an anticipated bonus rate of 5%. The same year, the provider declares a bonus rate less than this figure. The effect this has on the level of annuity payment she receives is that it will:
   1. increase after 12 months.
   2. decrease immediately.
   3. decrease the following year.
   4. have no effect.

2. The major advantage of the net pay method in providing pension tax relief to a higher paid individual is:
   1. contributions are taken from the bottom line of an individual’s net pay.
   2. contributions qualify for additional rate tax relief, regardless of an individual’s tax rate.
   3. there will be no liability to any annual allowance charge.
   4. contributions are taken from gross pay giving immediate relief at the prevailing rate.

3. Under auto-enrolment rules, if ABC Ltd has employees who had previously opted out, they must re-enrol the eligible jobholders at least every
   1. 12 months.
   2. 2 years.
   3. 3 years.
   4. 4 years.

4. 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.

5. John began receiving his State pension in January 2016 – he now wishes to defer the income and later take the benefit as a lump sum. He should be aware that (Tick all that apply.)
   1. the rate of interest payable in deferral is 2.5% above bank base rate.
   2. John must defer benefits for at least one year.
   3. it is too late as State payments have already started
   4. the lump sum will be taxed at the same rate as his other income.

Answers

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

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

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

4. D – See R04 Study Text, Chp 6
   Grab our taster mock exam paper for CII R04 Click here to download.

5. BD – See R04 Study Text, Chp 9
   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.