Friday Five Focus on Pensions – 5 Questions in 5 Minutes – 21 Nov 2025

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.

1. Alan’s 61st birthday is tomorrow. He has 25 years’ service in a 1/60th defined benefit pension scheme. His pensionable salary is £40,000. The scheme’s normal retirement age is 65. If Alan retires tomorrow and the scheme reduces his pension by 0.5% per month for early retirement, his pension will be
   1. £12,666.67
   2. £14,000.00
   3. £16,333.34
   4. £16,666.67

2. Denise had an uncrystallised defined contribution pension fund when she died in 2022. Denise had nominated her husband David and her daughter Molly to each receive half of her fund. If Molly was aged 30 when Denise died, she is considered to be a
   1. dependant.
   2. nominee.
   3. successor.
   4. beneficiary.

3. Alan, aged 40, is a member of an occupational pension scheme, the normal retirement age for which is 65. The rules of his scheme when he joined in 2018 stated that he has the right to take the benefits from the age of 55 with the consent of the trustee. From what age may Alan be able to take his benefits?
   1. 55
   2. 56
   3. 57
   4. 65

4. A contract-based pension scheme has which advantage over a trust-based pension scheme?
   1. Member contribution refunds for early leavers.
   2. Member contributions deducted from gross pay before tax and National Insurance contributions are applied.
   3. Less costly and time-consuming administration.
   4. Protection for the members, with their interest being safeguarded by Trustees.

5. Don is considering taking the benefits from his defined contribution pension plan in the form of a scheme pension. The scheme administrator must
   1. inform him that this is not possible with a defined contribution scheme.
   2. request evidence that he has taken independent advice.
   3. offer him the option of buying a lifetime annuity first.
   4. advise him of the commutation rate for his pension commencement lump sum (PCLS).

Answers

1. A; See R04 Study Text, Chp 5; Rationale: If tomorrow was Alan’s 65th birthday (normal retirement age), then his pension would have been: 25 × 1/60 × £40,000 = £16,666.67. As he is retiring 48 months early, his pension is reduced by 0.5% × 48 = 24%. Therefore, Alan will only receive 76% of his full pension entitlement, and his annual scheme pension will be £16,666.67 × 76% = £12,666.67.
2. B; See R04 Study Text, Chp 1; Rationale: David would be considered a dependant as he was married to Denise when she died. As Molly is aged 30 at the date of her mother’s death, she does not meet the criteria to be a dependant and is considered to be a nominee. She could take her share of the pension fund as a nominee’s flexi-access drawdown.
3. C; See R04 Study Text, Chp 3; Rationale: From 6 April 2028, the national minimum pension age will increase from 55 to 57. Scheme members may retain a lower retirement age where the scheme rules contained a right to retire early at, or prior to, 4 November 2021. However, in order to do so, such a right must have been unqualified, i.e., must not have required the consent of any other party.
4. C; See R04 Study Text, Chp 6; Rationale: A contract-based scheme is less costly and less time-consuming to administer for the employer compared to a trust-based scheme. The other three answers are all advantages of a trust-based scheme.
5. C; See R04 Study Text, Chp 3; Rationale: A defined contribution scheme may provide a scheme pension, however, must offer the option of an annuity first. The PCLS would be the standard 25% of the fund value rather than being calculated by commutation as the plan is a defined contribution one. Confirmation of advice is only required for a defined benefit transfer.

Grab the resources you need!

If this week’s pension scenarios got you thinking, it’s the perfect time to practise in a full exam-style setting. Our CII R04 E-Mocks mirror the structure and difficulty of the actual exam, helping you build familiarity and confidence. Start with the free taster to see how realistic the experience feels.

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