Chapter 4 - Retirement Solutions

Question 1

What should be in a financial plan of somebody in their foundation stage of life?

Answer 1

managing debts, such as credit cards, student loans and personal loans, creating a budget to track and control spending, enrolling the client in a company pension plan and setting aside funds for savings and investment

Question 2

What should be in a financial plan of somebody in their early accumulation stage of life?

Answer 2

as a minimum, cover short-term debt management, purchasing a property, increasing pension savings and investments (maximising ISA allowances and/or tilting the portfolio towards equities) and possibly contributing to a self-invested personal pension (SIPP)

Question 3

What should be in a financial plan of somebody in their late accumulation stage of life?

Answer 3

cover boosting retirement savings and investments through carry forward of unused annual allowances in the previous three years, and utilising other income, such as bonuses received

Question 4

What is Business Asset Disposal Relief and the rules governing it?

Answer 4

CGT charged at a reduced rate of 10% providing the client is on the first £1 million of qualifying gains

• disposing wholly or partly of a business as a sole trader or a partner
• disposing of shares in a trading company, provided that the total holding represents at least 5% of total shares and voting rights
• owned for at least two years

Question 5

What are the thresholds for purchase a first house using a LISA?

Answer 5

• a LISA must be open for at least 12 months
• the house being bought must be worth less than £450,000 with the aid of a mortgage.
• the money must also be paid directly to the solicitor or conveyancer.

Question 6

When was the NEST Shariah Savings Fund Launched?

Answer 6

2011

Question 7

What is the tax treatment of interest and dividends in a Collective Investment Scheme

Answer 7

paid gross, but is taxable

Question 8

How are gains taxed within a Collective Investment Fund?

Answer 8

No tax payable

Question 9

What are the normal options available to DC Pension Fund schemes at Retirement?

Answer 9

• annuity purchase
• uncrystallised funds pension lump sum (UFPLS)
• flexi-access drawdown (FAD)
• (where offered) purchase of a scheme pension paid directly from the assets of the scheme

Question 10

What is sequencing risk?

Answer 10

Where withdrawals are being taken from the portfolio, the impact of a poor sequence of returns in the early years will be more pronounced

Question 11

What is Phased Retirement?

Answer 11

clients who wish to start working part-time or to gradually cut back on their working hours until they decide to retire completely

Question 12

What is the maximum pension rights that can be taken when a pension scheme is being wound up early?

Answer 12

£18,000

Question 13

What is the average cost of staying at a care home?

Answer 13

£39,000 per year, rising to £50,000 if nursing care was also required