Friday Five Focus on Pensions – 8 March – 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 2023/24, examinable by the CII until 31 August 2024.

1. Susan, age 62, earns a salary of £225,000 during the 2023/24 tax year along with dividend income of £30,000. Her employer also makes a pension contribution of £25,000 to its occupational pension scheme on her behalf.
    
   During the tax year, she takes a pension commencement lump sum (PCLS) of £50,000 from her personal pension, placing the remaining £150,000 into a flexi-access drawdown account. Susan’s annual allowance for the year 2023/24 will be
   1. £60,000
   2. £50,000
   3. £25,000
   4. £10,000

2. Sarah is retiring after 20 years’ service in a 1/60th defined benefit pension scheme. Her final pensionable salary is £48,000. Sarah can commute part of her pension for a pension commencement lump sum (PCLS) of 3/80th of final pensionable salary for each year of service. The commutation factor is 12:1. Should Sarah take all of her PCLS entitlement, her reduced pension will be
   1. £12,000 p.a.
   2. £13,000 p.a.
   3. £15,000 p.a.
   4. £16,000 p.a.

3. Which of the following would NOT be a valid reason for Toby’s scheme pension to be reduced whilst in payment?
   1. The result of a pension sharing order.
   2. The reduction in with profit bonus rates from the provider.
   3. The scheme’s pension was a “bridge” until State pension age.
   4. The result of a court order.

4. Alan is paying a total gross amount of £2,000 per month into his pension via salary sacrifice. This is paid on the first of each month. On 10th November, he takes a personal pension as an uncrystallized funds lump sum. For the current tax year he
   1. will be subject to a money purchase annual allowance (MPAA) excess tax charge.
   2. will not be subject to an MPAA excess tax charge.
   3. Is entitled to make a scheme pays nomination.
   4. should immediately opt out of the pension scheme.

5. Simon, whose relevant UK earnings for 2023/24 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.

Answers

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

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

3. B – See R04 Study Text, Chp 7
   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. D – See R04 Study Text, Chp 2
   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.