CEMAP 1 - ITFS 2 (Specimen papers) Flashcards
The ‘direct pay’ arrangement is where a personal scheme member pays the contributions directly to the pension provider.
a) True b) False
False
It is where the employer collects the employee’s contribution from their pay and passes it on to the pension provider.
In order to qualify for auto-enrolment, an employee must:
a) be aged at least 22.
b) be under age 60.
c) opt-in to the scheme.
d) earn more than £5,000.
be aged at least 22.
Which of the following is true regarding the NEST scheme?
a) Contributions can only be made into the default fund.
b) Benefits can be taken from age 55.
c) It cannot run alongside an existing occupational scheme.
d) The minimum contribution per employee is 10% of earnings.
The minimum contribution per employee is 10% of earnings.
Which type of pension scheme is most likely to allow an individual to hold a direct investment in commercial property?
a) A defined-contribution occupational pension.
b) A self-invested personal pension.
c) A stakeholder pension.
d) A personal pension.
A self-invested personal pension.
Caroline is 38 and earns £25,000 a year as a department manager for a large firm. What is the maximum contribution that could be paid into her personal pension to give her maximum tax relief and avoid any tax penalties?
a) £25,000 from Caroline only.
b) Up to £25,000 between Caroline and her employer.
c) £25,000 from Caroline and £15,000 from her employer.
d) £40,000 from Caroline only.
£25,000 from Caroline and £15,000 from her employer.
Caroline can pay in an amount up to her salary, and her employer can top it up to the annual allowance amount.
Ali has been a member of his company’s 1/50th defined-benefit pension for 20 years and is about to retire. His pensionable salary is £30,000. What will Ali’s pension be?
a) £10,000.
b) £12,000.
c) £15,000.
d) £30,000.
20/50th of £30,000 = 20/50 x £30,000 = £12,000.
When does the Money Purchase Annual Allowance apply to pension contributions? If the plan holder:
a) takes benefits before the scheme retirement date.
b) uses the fund to purchase an annuity.
c) takes benefits through the uncrystallised funds pension lump sum option.
d) earns more than the income threshold.
takes benefits through the uncrystallised funds pension lump sum option.
Alisha is just in the higher-rate tax band. She has a personal pension plan valued at £40,000 and wants to take all of it as one lump sum on her sixtieth birthday next month. How much of the withdrawal will be tax free?
a) It will all be taxable.
b) £30,000.
c) £20,000.
d) £10,000.
£10,000
25% of the pension can be taken as a tax-free lump sum (£40,000 x 25% = £10,000).
In strong stock market conditions, which type of mortgage-linked endowment is most likely to allow early repayment of the mortgage?
a) Low-cost with profits.
b) With-profits.
c) Non-profits.
d) Unit-linked.
Unit-linked.
Jason has a flexible whole-of-life assurance policy on a maximum cover basis. This means that Jason’s:
a) premiums will be higher than those of a balanced cover policy.
b) sum assured will increase after ten years.
c) plan will accumulate a higher investment value than a minimum cover policy.
d) premiums are likely to increase after ten years.
premiums are likely to increase after ten years.
What add-on benefit will ensure a life assurance policy will continue to provide cover when premiums are suspended due to the policyholder’s illness preventing them from working?
a) Temporary disability cover.
b) Terminal illness benefit.
c) Waiver of premium benefit.
d) Income protection benefit.
Waiver of premium benefit.
Which of the following is true of a unitised with-profits endowment?
a) Unit values cannot fall.
b) It cannot be assigned to a lender.
c) The full unit value is payable on surrender of the policy.
d) Only terminal bonuses are added.
Unit values cannot fall.
What is the normal maximum age for exercising the renewal option on a renewable term assurance policy?
a) 50.
b) 55.
c) 60.
d) 65.
65.
