Friday Five Focus on Pensions – 7 July – 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. Sportsman Joe retires in 2022/23 at the age of 35. Joe’s lifetime allowance will be reduced by what percentage for each complete year before normal minimum pension age?
   1. 10%
   2. 5%
   3. 2.5%
   4. 1.5%

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. Which of the following would be seen as an advantage of drawing benefits by way of phased retirement through capped drawdown pension rather than through a flexi-access drawdown plan?
   1. Full pension commencement lump sum at outset.
   2. Funds can be used to provide unlimited withdrawal amounts.
   3. It will not usually trigger the money purchase annual allowance rules.
   4. The member will benefit from mortality drag.

4. Simon, whose relevant UK earnings for 2022/23 are £90,000, wishes to contribute to a personal pension. As Simon is self-employed, tax relief will be given by contributions
   1. paid gross and claimed as an expense against profits.
   2. paid net of 40%, as Simon is a higher-rate taxpayer.
   3. paid net of 20% and Simon claims extra relief via self-assessment.
   4. deducted from income before tax is levied; the net pay system.

5. Sam, age 42 and a higher rate taxpayer, 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. stocks and shares ISAs.
   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. C – See R04 Study Text, Chp 8
   Grab our taster mock exam paper for CII R04. Click here to download.

4. C – See R04 Study Text, Chp 2
   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?

If you found this quiz useful for your CII exam revision, please do share it with your colleagues.