Friday Five Focus on Pensions – 5 Questions in 5 Minutes – 19 Jun 2026

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 2025/26, examinable by the CII until 31 August 2026. They do not relate to tax year 2026/27 which is only examinable by the CII from 1 September 2026.

1. Manesh is a member of a defined contribution pension scheme but does NOT receive an annual Statutory Money Purchase Illustration (SMPI). This is because Manesh has a
   1. personal pension.
   2. Stakeholder Pension.
   3. Self-Invested Personal Pension.
   4. Retirement Annuity Contract.

2. Desmond dies at the age of 68 in receipt of a scheme pension. If the scheme continues to pay an income after his death, his wife Debbie will receive a
   1. dependant’s scheme pension paid tax-free.
   2. lifetime annuity paid tax-free.
   3. dependant’s scheme pension taxed as her pension income under PAYE.
   4. dependant’s lifetime annuity taxed as her pension income under PAYE.

3. A Section 143 Valuation is an actuarial assessment carried out in connection with the
   1. Pension Protection Fund (PPF) determining whether there are insufficient assets in an insolvent employer’s pension scheme.
   2. payment of a cash equivalent transfer value when a member leaves an occupational scheme.
   3. triennial fund valuation on a defined benefit scheme.
   4. transfer calculation on wind up of a defined benefit scheme with the assets moving over to a defined contribution vehicle.

4. Ricky is approaching retirement and has decided to opt for flexi-access drawdown rather than buying an annuity. His adviser should make him aware that he will suffer mortality
   1. drag.
   2. gain.
   3. cross subsidy.
   4. factor.

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. D; See R04 Study Text, Chp 6; Rationale: It is not a statutory requirement to send members of retirement annuity contracts an annual statutory money purchase illustration unlike personal pensions, stakeholder pensions and SIPPs.
2. C; See R04 Study Text, Chp 3; Rationale: If Desmond’s pension scheme continues to pay an income to his wife Debbie after his death, this will be paid to her as a dependant’s scheme pension and will be taxed as her pension income under PAYE. (Note: a dependant’s scheme pension is taxed as the dependant’s pension income whether or not the scheme member dies before or after age 75).
3. A; See R04 Study Text, Chp 4; Rationale: A Section 143 Valuation is an actuarial assessment carried out by the scheme actuary when the Pension Protection Fund (PPF) is taking over the assets of an insolvent company’s pension scheme. (The section 143 valuation determines if the scheme has sufficient assets to pay at least the PPF level of compensation).
4. A; See R04 Study Text, Chp 8; Rationale: A risk of drawdown is mortality drag; this is the negative impact experienced when delaying an annuity purchase due to the reducing benefit of mortality cross subsidy.
5. D; See R04 Study Text, Chp 1; Rationale: Saving through a registered pension scheme gives a client the incentive of receiving tax relief on their contributions. Individuals receive tax relief at up to their highest rate of tax, and firms can treat the contributions as a business expense. The other answers are incorrect as benefits are usually available from age 55 (not 50), 25% of the fund can usually be taken as a tax-free cash lump sum and pensions are often deemed difficult for clients to understand.

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