Friday Five Focus on Pensions – 6 August – 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 2020/21, examinable by the CII until 31 August 2021. They do not relate to tax year 2021/22 which is only examinable by the CII from 1 September 2021.

1. 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.

2. Why might an employer decide to provide death in service benefits through a separate insured scheme as opposed to through a defined benefit scheme?
   1. To maintain death in service benefits without draining the fund
   2. To treat the death in service benefits as an allowable expense
   3. If the employees were all below 45
   4. As the defined benefit scheme is fairly large

3. Max is a client of yours who has always invested any surplus income directly in the stock market. He now wishes to set up a pension arrangement where he can continue to do this. Which of the following would be suitable for him?
   1. A self-invested personal pension
   2. A small, self-administered scheme
   3. A retirement annuity contract
   4. A Stakeholder plan or personal pension

4. The lifetime allowance is reduced by a percentage for each year before normal pension age that someone (who was entitled to a special low retirement age prior to ’A’ day) is taking benefits after 6 April 2006?
   1. 10%
   2. 5%
   3. 3.5%
   4. 2.5%

5. Sam is looking at ways of investing for retirement that will NOT involve pension plans. He only wants to invest in areas where tax relief is available to him. As his financial adviser, you should be aware that you could consider recommending: Tick all that apply.
   1. venture capital trusts.
   2. equity ISA’s.
   3. buy to let properties.
   4. seed enterprise investment schemes.

Answers

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

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

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

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

5. AD – See R04 Study Text, Chp 10
   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?

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