Friday Five Focus on Pensions – 5 Questions in 5 Minutes – 6 Mar 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.

1. When the administrators of a defined benefit scheme calculate an early leaver transfer value, the process of converting the lump sum value of pension benefits at retirement to a capital value in today’s terms is known as
   1. discounting.
   2. revaluing.
   3. capitalising.
   4. securitising.

2. Cyril, a higher rate income taxpayer aged 68, is looking to make a personal pension contribution to offset his tax liability. He has been informed that his annual allowance will be reduced to £10,000. This is because he
   1. has accessed benefits flexibly.
   2. is subject to the tapered annual allowance.
   3. was the subject of a pension debit following his divorce.
   4. is past state pension age.

3. Being “fit and proper” to undertake the role is a test that could be used by the Pension Regulator in assessing the appropriateness of the
   1. Scheme Administrator.
   2. Scheme Trustee.
   3. Employer.
   4. Scheme Actuary.

4. The minimum standards on a recently established Stakeholder pension would include
   1. a maximum initial charge of 1.5%.
   2. a requirement to accept transfer payments in.
   3. transfer out charges capped at 10%
   4. a minimum permitted contribution not higher than £25 net.

5. Frank’s pension complaint has been accepted by the Financial Ombudsman Service (FOS) for investigation because Frank believes
   1. his State Pension forecast is incorrect.
   2. his pension plan was ill advised at inception 10 years ago.
   3. he was wrongly advised to transfer his pension.
   4. the information received from the trustees of his DB scheme is wrong.

Answers

1. A; See R04 Study Text, Chp 5; Rationale: To calculate an early leaver transfer value, the scheme administrators must calculate the cost needed to buy an annuity for the amount of the preserved pension (escalated to normal pension age). This cost is then discounted to the present.
2. A; See R04 Study Text, Chp 2; Rationale: The annual allowance can be reduced to £10,000 for one of two reasons – Cyril is either subject to the MPAA or the tapered annual allowance (TAA). The latter would require threshold income over £200,000 and adjusted income over £260,000, which would make him an additional rate taxpayer. Pension debits and age do not impact annual allowance.
3. B; See R04 Study Text, Chp 4; Rationale: The Pensions Regulator can prevent someone from acting as a pension scheme trustee if it does not consider them ‘fit and proper’ to undertake the role.
4. B; See R04 Study Text, Chp 6; Rationale: A stakeholder pension is subject to ‘minimum standards’. These include accepting transfer payments from other pension sources, a minimum contribution of no higher than £20 per month, no transfer charges, and a maximum annual fund charge of 1.5% reducing to 1% after 10 years.
5. C; See R04 Study Text, Chp 4; Rationale: If Frank was wrongly advised to transfer his pension, this would be a matter that the Financial Ombudsman Service (FOS) would accept. Answer d) is incorrect as an individual’s complaint against their workplace pension scheme would be dealt with by the Pensions Ombudsman. Answer b) would not be accepted by the FOS as the complaint relates to an event over 6 years ago, and answer a) is false as the FOS only investigates complaints about the sale and marketing of products from FCA regulated companies.

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