Friday Five Focus on Pensions – 8 January – 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.

1. Mary dies at age 56 before crystallisation of her only pension fund. At the date of death, her SSAS value was £750,000, and she also had £1,048,100 of pension term assurance. If her dependants took all benefits in the form of a lump sum benefit, the lifetime allowance charge would be:
   1. £0.
   2. £125,000.
   3. £181,250.
   4. £398,750.

2. The International Accounting Standards 19 (IAS 19) laid down a requirement for defined benefit schemes that any scheme surplus or deficit must be shown on the company:
   1. balance sheet and the present value of past service liabilities should reflect equity yields rather than high-quality bond yields.
   2. profit and loss account and the present value of past service liabilities should reflect high-quality bond yields rather than equity yields.
   3. balance sheet and the present value of past service liabilities should reflect high-quality bond yields, rather than equity yields.
   4. profit and loss account and the present value of past service liabilities should reflect equity yields, rather than high-quality bond yields.

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. Simon, whose relevant UK earnings for 2020/21 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 high-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. Which of the following are acceptable HMRC formats for a lifetime annuity being purchased with the accumulated fund of a Stakeholder pension? Tick all that apply.
   1. Payable annually in arrears.
   2. A survivor pension, no greater than 50% of the member’s pension.
   3. Payable for a maximum period of 10 years.
   4. An annuity protection capital lump sum.

Answers

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

2. C – 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. 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 7
   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.