Chapter 7 - Secured pension options Flashcards
How will an annuity protection lump sum payment from a occupational defined contribution scheme pension be taxed if the member is aged 74 at date of death?
a.It will be taxed at 45%.
b.It will be taxed as the recipient’s pension income via PAYE.
c.It will be paid tax free.
d.It will be taxed at 55%.
c.It will be paid tax free.
An annuity protection lump sum is a RBCE, and so tested against the member’s LSDBA where the member dies before age 75.
Where the benefits are within the member’s remaining LSDBA they will be paid tax free. If they exceed the member’s remaining LSDBA then the excess will be taxed as the recipient’s pension income via PAYE.
Where the member has reached age 75 the whole lump sum will be taxed as the recipient’s pension income via PAYE.
Chapter reference 7C1E
Femi is in poor health and is eligible for an impaired life annuity. He will be offered an impaired life annuity on male rates rather than unisex rates if he is suffering from:
a.diabetes.
b.heart disease.
c.prostate cancer.
d.dementia.
c.prostate cancer.
There are two circumstances in which the requirement to use unisex annuity rates does
not apply:
- Some medical conditions are exclusively or primarily associated with one gender (i.e. breast cancer for women and prostate cancer for men). This may mean that in some
circumstances impaired life annuities can take gender into account when setting the rate offered. - Where the income is purchased for the member by the scheme, so where a defined benefit scheme purchases an income for the member (as it must be purchased/provided by the scheme). It could also occur where an occupational defined contribution scheme provides an income from scheme funds or buys a scheme pension from an annuity provider for the member. The types of schemes where this is most likely to occur would be a SSAS or a SIPP set up under trust (i.e. it is an occupational scheme rather than a personal scheme)
Chapter reference 7C2G
What is NOT a potential benefit for a defined benefit scheme that chooses to pay scheme pensions directly from the scheme assets?
a.If members [and/or their dependants] die sooner than expected the scheme will benefit from mortality gain.
b.The payments can be reduced if the funding position of the scheme worsens.
c.The scheme may choose to secure the income in future when annuity rates may have increased.
d.There is no immediate outflow of capital from the scheme.
b.The payments can be reduced if the funding position of the scheme worsens.
The potential benefits and drawbacks for a scheme of paying the scheme pension directly from scheme assets include the following.
Benefits
- There is no immediate outflow of capital from the scheme (i.e. they only have to pay out the monthly income rather than the capital cost of buying this income via an insurance company).
- The funds within the scheme remain invested and so benefit from any out-performance of
these assets. - The scheme has the option to secure the income at a later date if desired (i.e. make a payment to
an insurance company in respect of the member) and may benefit from an increase in annuity rates or the worsening of the member’s health (i.e. a smaller capital sum is needed to secure the same level
of income). - If the member and/or their dependants die sooner than expected, the scheme retains the ‘unused’ funds for the benefit of all members, whereas if they secured the income with an insurance company, the insurance company would benefit from these funds, i.e. the scheme benefits from mortality gain.
Drawback
- The payments must be made whatever the funding position of the scheme.
- The member and/or their dependants may live longer than expected and the scheme bears the cost of these ‘extra’ payments.
- The scheme retains both the longevity and investment risk, whereas these are transferred to
the insurance company where the scheme is bought from an insurance company. - It entails additional administration for the scheme.
Chapter reference 7C1
Which statement relating to a dependant’s scheme pension is INCORRECT?
a.It does not have to be paid for the life of the dependant.
b.It can include a guarantee period.
c.It can be commuted for a cash lump sum on the grounds of triviality.
d.It does not need to start as soon as the member dies.
b.It can include a guarantee period.
A scheme pension paid to a dependant, by whatever method, may not give rise to any further PCLS nor can it provide any further benefit following the death of the dependant. In other words, a dependant’s scheme pension cannot include:
- a guarantee period
- any form of pension protection.
Chapter reference 7C1E
What is the maximum term for a guarantee included in a scheme pension for a scheme member who is 68 when they crystallise their benefits?
a.Seven years.
b.Two years.
c.Ten years.
d.Five years.
c.Ten years.
A scheme pension may be guaranteed for a term of no more than ten years. This is often
referred to as a ‘term certain’. When a member dies within the guarantee period the full pension continues to be paid until the guarantee period ends.
HMRC rules do not place any restrictions on who can receive the payments in respect of a
guarantee
Chapter reference 7C1E
Nino, who is 55, is about to purchase a lifetime annuity with his personal pension fund. Which annuity structure would NOT be possible?
a.A joint life annuity with 50% of the income paid to Nino and 50% paid to his wife Ellen.
b.A joint life annuity, where any survivor’s income would be paid to his daughter Sharon, who is 26 and not dependent upon him.
c.A joint life annuity, where any survivor’s income would be paid to his wife Ellen.
d.A single life annuity with annuity protection where any annuity protection lump sum would be paid to his son Matthew, who is 28 and not dependent upon him.
a.A joint life annuity with 50% of the income paid to Nino and 50% paid to his wife Ellen.
A joint life annuity is mostly designed for couples. Like a single life annuity, it pays you a regular, guaranteed income until you die. But when you die that income switches to someone else instead of just stopping. Some or all of it will go to your partner or a dependant as regular payments.
it cannot pay out to two people at once, it must pay to a single life, but when one dies the other takes over.
Survivor’s annuity
- Lifetime annuity bought before 6 April 2015: member could include a dependant’s annuity if they chose.
- Lifetime annuity bought after 6 April 2015: if its rules allow, a member can choose that a
continuing income is paid to a dependant or nominee after their death.
Chapter reference 7C2E
A member will shortly become entitled to receive his scheme pension. He also wishes to take the maximum possible lump sum payment. Within what period must this lump sum payment be paid to be treated as a pension commencement lump sum?
a.Within eighteen months of the date the member becomes entitled to the scheme pension.
b.No earlier than twelve months before, and no later than six months after, the date the member becomes entitled to the scheme pension.
c.No earlier than six months before, and no later than twelve months after, the date the member becomes entitled to the scheme pension.
d.Within six months of the date the member becomes entitled to the scheme pension.
c.No earlier than six months before, and no later than twelve months after, the date the member becomes entitled to the scheme pension.
When a member becomes entitled to a scheme pension, the scheme rules may also give them the right to a PCLS. To be treated as a PCLS, entitlement to the lump sum must
be linked to the scheme pension entitlement. It must be paid no earlier than six months before, and no later than twelve months after, the date the member becomes entitled to that scheme pension.
Chapter reference 7C1C
Joe retired three years ago at age 65 and now receives a scheme pension from his former employer’s defined benefit scheme. If his pension has recently been reduced, the most likely reason is because he:
a.is in ill-health.
b.has recently divorced and his scheme pension is subject to a pension debit.
c.has reached State Pension Age.
d.has returned to work for the company on a part time basis.
b.has recently divorced and his scheme pension is subject to a pension debit.
Chapter reference 7C1B
A member wishes to commute their pension benefits valued at £28,000 on the grounds of triviality. Why have they been informed this is not possible?
a.The benefits they wish to commute are uncrystallised.
b.The benefits are held in an executive pension plan.
c.The member has not yet reached age 65.
d.The benefits are valued at less than £30,000.
b.The benefits are held in an executive pension plan.
The following benefits can be commuted on the grounds of triviality:
- uncrystallised defined benefit pension rights;
- defined benefits scheme pensions that are in payment; and
- in payment money purchase in-house scheme pensions.
Certain conditions must be met if a lump sum payment made on or after 16 September 2016 is to be considered a trivial commutation lump sum payment. These are that:
- the member has not been paid a trivial commutation lump sum previously (from any registered pension scheme), except any earlier payment within the commutation period;
- the lump sum is paid in respect of a defined benefit arrangement and/or an in-payment money purchase in-house scheme pension;
- the value of the member’s pension rights (defined benefit and defined contribution, including those previously crystallised for lifetime allowance purposes) on the nominated date does not exceed the commutation limit of £30,000;
- when the lump sum is paid the member must have some available lump sum allowance (LSA), although the payment does not use any of the member’s LSA or lump-sum death benefit allowance;
- the lump sum is paid when the member has reached the normal minimum pension age (currently 55, but increasing to age 57 in 2028) or meets the ill health conditions or has a protected pension age
- the lump sum extinguishes the member’s entitlement to defined benefits and in-payment money purchase in-house scheme pensions under the registered pension scheme making the payment.
Chapter reference 7B2
What is the maximum amount that can be paid as a trivial commutation lump sum death benefit?
a.£30,000 in total across all schemes.
b.£10,000 in total across all schemes.
c.£30,000 per scheme.
d.£10,000 per scheme.
c.£30,000 per scheme.
s the maximum that can be paid as a trivial commutation lump-sum death benefit is £30,000.
This is the maximum amount per scheme, not a maximum across all schemes.
Where the amount of the lump sum paid is more than £30,000, the excess is not a trivial
commutation lump-sum death benefit. If it cannot be paid as some other type of authorised lump-sum death benefit, the excess over £30,000 will be an unauthorised member payment
and taxed accordingly.
Chapter reference 7B3
Outline the differences between a conventional lifetime annuity and a flexible lifetime annuity.
The payments from a conventional lifetime annuity can only reduce in line with HMRC prescribed circumstances. A flexible annuity can reduce by a greater amount.
Receiving a payment from a conventional lifetime annuity is not a trigger event for the money purchase annual allowance rules whereas receiving a payment from a flexible lifetime annuity is.
James selected a with-profits annuity on his retirement. He chose an anticipated bonus rate of 2%. The actual bonus rate declared by the life office at the end of the first year is 4%.
What will happen to James’ income?
James’ annuity income will increase because the actual bonus rate exceeds the anticipated bonus rate.
Harriet is in receipt of a dependant’s pension following the death of her husband, Simon, in May 2024. The scheme agreed to commute the dependant’s pension for a trivial commutation lump-sum death benefit, but at the point her benefits were due to be paid the scheme informed her that they were valued at £32,000. Harriet should be aware:
a. She cannot take this benefit as a trivial commutation lump-sum death benefit as
the payment will exceed the triviality limit of £30,000.
b. She can take £30,000 as a trivial commutation lump-sum death benefit but the remaining £2,000 will have to be forfeited.
c. She can take £30,000 as a trivial commutation lump-sum death benefit and will have an unauthorised payment charge applied to £2,000.
d. 2024 She can take this benefit as a trivial commutation lump-sum death benefit but she will have an unauthorised payment charge applied to the whole payment.
c. She can take £30,000 as a trivial commutation lump-sum death benefit and will have an unauthorised payment charge applied to £2,000.
Following the death of his wife at the age of 67, Quentin, aged 70 started to receive a guaranteed payment in respect of her lifetime annuity in January 2017. The remaining payments are valued for triviality purposes at £26,000. If Quentin commutes the remaining payments for a trivial commutation lump-sum death benefit,
how will this payment be taxed?
a. 25% will be paid tax free and the remainder will be taxed as his pension income via PAYE.
b. The whole payment will be taxed as his pension income via PAYE.
c. The whole payment will be taxed at 45%.
d. The whole payment will be paid tax free.
The answer is b.
Even though the income he was receiving was paid free of tax, if he commutes the remaining payments the whole lump sum will be taxed as his pension income via PAYE.
Dominic is aged 58. In September 2024 he takes benefits from his pension plans for the first time when he takes a small pots payment from a personally held stakeholder pension valued at £8,000. In December 2024 he takes a further small pots payment, this time from an executive pension plan valued at £10,000. Dominic should be
aware that, under the current regulations, he can take:
a. Only one more small pots payment.
b. Only two more small pots payments from non-occupational schemes.
c. Only two more small pots payments from occupational schemes.
d. An unlimited number of small pots payments.
Answer is b. He has taken one small pots payment from a non-occupational scheme (the stakeholder – the EPP is an occupational pension) and the current rules only permit a maximum of three such payments from non-occupational funds (therefore, (d) is wrong). There is no limit on the occupational small pots payments so (a) and (c) are
also wrong
Saul, aged 58, and his brother Reuben, aged 48, are both married. They are both 50% directors of a private limited company and are the only members of the small self-administered scheme (SSAS) that the company sponsors. The only contributions paid to the scheme are employer contributions. The trustees of the scheme have agreed that Saul can start drawing an income from the assets of the scheme in the form of a scheme pension.
Which ONE of the following statements is correct?
a. Saul will receive the income free of all income tax as he is under the age of 75.
b. It is only possible for Saul to receive an income from the scheme because he has ceased employment with the company.
c. If in future tax years the company contributes more than £10,000 to the SSAS Saul will have to pay an annual allowance tax charge.
d. When Saul dies only Reuben is eligible to receive any death benefit in respect of his pension.
a. False. The income will be taxed as his pension income and paid after tax is deducted via the PAYE system.
b. False. There is no requirement to stop working when you draw an employer sponsored pension.
c. True. The scheme has less than twelve members (i.e. less than eleven other members) and the income is being paid directly from the scheme’s assets. Therefore, the MPAA rules are triggered.
d. False. Death benefits payable in respect of his pension can be paid to his wife
Terrence died recently. He included a spouse’s pension when he set up his lifetime annuity. His widow, Heather, should be aware that, in setting up the spouse’s annuity:
a. She can include a five year guarantee if she wishes.
b. It can be transferred to another provider.
c. She can include a survivor’s pension to benefit her sister.
d. It is non-commutable except under the rules of triviality.
b. It can be transferred to another provider.
d. It is non-commutable except under the rules of triviality
Karen, aged 67, is married to John. She wishes to purchase a lifetime annuity with her pension fund in August 2024.
In respect of this, which of the following are correct?
a. She must purchase an income that escalates by the lesser of RPI and 2.5% p.a.
b. The maximum guarantee period she can select is ten years.
c. Her income will be determined by unisex rates.
d. She can opt to include annuity protection.
e. She must include a 50% spouse’s pension.
a. No. She can choose whether or not she wants an increasing income.
b. No. Depending on the options offered by the insurance company, she may be able to choose a guarantee period longer than ten years.
c. Yes. As she is purchasing her annuity after 21 December 2012, she will receive a unisex rate.
d. Yes. An annuity protection lump-sum death benefit can be included if she wishes.
e. No. She can choose what options she includes.
Humphrey, aged 59, has three pension plans. An executive pension plan (EPP) valued at £12,000, a personal pension plan (PPP) valued at £34,000 and benefits held in his employer’s defined benefit scheme which will provide him with a pension
income of £30,000 p.a. He has heard he may be able to commute some or all of his EPP and PPP benefits as small pots payments.
Can Humphrey commute these
plans and if so, how?
Humphrey cannot commute the EPP. As the EPP is valued at more than £10,000 it would have to be split to meet the £10,000 limit. It is an occupational scheme and it
is not possible to commute multiple pots related to the same occupational scheme. He can split the PPP into four pots (for example £10,000 × 3 plus one pot valued
at £4,000). He could then commute three of these as this is the maximum number of non-occupational small pots you can commute and there is nothing to stop these being related.
How many small pots payments can a member take?
• From non-occupational schemes maximum is 3
• There is no limit from unconnected occupational schemes
What are the two occasions when a trivial commutation lump-sum death benefit may be paid?
• If a survivor commutes their survivor’s pension
• Where member dies within guarantee period and recipient wants to commute the remaining payments
What are the rules regarding the term of a guarantee period under a scheme pension and a lifetime annuity?
• A scheme pension may be guaranteed for a term of no more than 10 years
• Lifetime annuities bought on or after 6 April 2015 - no limit on how long the guarantee period can last
Explain the tax position of an annuity protection lump sum where the member dies before age 75 and after 75.
• Before age 75 - tax free subject to LSA - if exceeded then taxable as income
• After 75 - taxed as pension income if paid to an individual or at 45% if paid to a trustee or personal representative
State three criteria that might mean a lifetime annuity is still the best option for an individual (rather than going into drawdown).
The individual has:
• a low attitude to risk
• low or no capacity for loss
• a need for a guaranteed income (for them and/or survivors)
• no desire to self-manage
• a longer life expectancy based on family history
• a medical condition that could mean enhanced annuity rates
Ali has shown an interest in purchasing an annuity to meet his retirement income needs. His adviser should make him aware that this course of action may be particularly suitable where he has a (Tick all that apply.)
A cautious attitude to risk.
B. low capacity for loss.
C. family history of early death.
D. need for guaranteed income.
A cautious attitude to risk.
B. low capacity for loss.
D. need for guaranteed income.
An annuity may be particularly suitable where he has a cautious attitude to risk, low capacity for loss, family history of longevity and/or need for guaranteed income.
Chapter reference 7C2
Nick recently died while in receipt of his scheme pension from his occupational defined contribution pension scheme. Nick was aged 80 and received a level pension of £25,000 gross pa. He had received benefits for a period of exactly 5 years. The fund used to provide his pension (after PCLS) was £500,000.
Calculate the annuity protection lump sum death benefit payable and state how it will be taxed.,
Answer
The annuity protection lump sum payment is £375,000 - taxed as recipient’s pension income.
Detailed explanation
We start with the original pension fund and deduct pension payments received up until the date of death:
£500,000 - (£25,000 x 5) = £375,000
The lump sum is taxable as the recipient’s pension income via PAYE.
NB. The lump sum death benefit is called “annuity protection lump sum” as Nick’s scheme is a defined contribution scheme, if the lump sum arose from a defined benefit scheme it would be referred to as a pension protection lump sum death benefit. Also, note that if Nick had died before age 75 the payment would have been tax-free.
CII R04 Study Text Chapter 7, Section C1E
Manuel retired in 2019 and purchased a conventional lifetime annuity with his £300,000 pension fund with 100% protection. The annuity provided £19,000 gross annual income.
If he died in May 2024 aged 70 having received exactly 5 years’ payments
calculate the net amount that would be paid.
Answer
Purchase price - £300,000
Payment to point of death - £95,000 (£19,000 x 5 years)
Lump sum remaining - £ 205,000
No tax is payable as he was under 75 at date of death
Manuel retired in 2019 and purchased a conventional lifetime annuity with his £300,000 pension fund with 100% protection. The annuity provided £19,000 gross annual income.
What is the tax position if Manuel died after age 75 having received 10 years’ payments?
Answer
Purchase price - £300,000
Payment to death - £190,000 (£19,000 x 10 years)
£300,000 - £190,000 = £110,000
£110,000 taxed as beneficiary’s pension income via PAYE
Detailed explanation
The payment of an annuity protected lump sum is tax free if the owner of the annuity dies before 75.
It is taxable if death occurs after 75 on the beneficiary.
CII R04 Study Text Chapter 3, Section B1C
Zaynab wishes to use trivial commutation. She should be aware that (Tick all that apply.)
A. she will not be able to unless she is aged at least 60.
B. there is a 12-month commutation period.
C. the commutation limit is £30,000 across all schemes.
D. all of the resulting proceeds will be tax-free.
B. there is a 12-month commutation period.
C. the commutation limit is £30,000 across all schemes.
Rules for a trivial commutation of benefits by a pension member dictate that the payment must be made within the 12-month commutation period, and the limit is £30,000. The facility is available from age 55 and not all of the proceeds are tax-free (normally only 25% is tax-free if the commutation is from uncrystallised funds or the full amount is taxed as normal income if the lump sum is paid in exchange for a pension already in payment). - Chapter 7, Section B2, Learning Outcome 6
Philippe is considering transferring out of his defined benefit pension scheme. He should be aware that this will normally mean giving up (Tick all that apply.)
A. a lump sum death benefit based on a multiple of salary.
B. a pension based on a percentage of salary.
C. a guaranteed income for life.
D. the prospect of investment growth.
A. a lump sum death benefit based on a multiple of salary.
B. a pension based on a percentage of salary.
C. a guaranteed income for life.
Features of a defined benefit pension scheme that would be lost on transfer normally include lump sum death benefits, a pension that is expressed as a percentage of salary and a guaranteed income for life. Investment growth is not relevant to a member of a defined benefit scheme. - Chapter 7, Section C, Learning Outcome 6
Christine, aged 59, is shortly to retire after a 40-year career spent working for a large retailer. She has a substantial defined contribution pension pot and being naturally risk averse is looking to use it to purchase a lifetime annuity. She should be aware that should she do so, the maximum guarantee period available to her would be
A. No maximum
B. 5 Years
C. 10 Years
D. 30 Years
A. No maximum
The maximum guarantee period of 10 years which formerly applied has been removed for annuities purchased after 5 April 2015. - Chapter 7, Section C2E, Learning Outcome 6
Edward, aged 20, has been advised that he is the beneficiary of his father Paul’s scheme pension following Paul’s death at the age of 56. What type of benefit would Edward not potentially be entitled to from the scheme?
A. dependents flexi-access drawdown.
B. A dependents scheme pension.
C. payments under a guarantee period.
D. a lump sum death benefit.
A. dependents flexi-access drawdown.
A dependent’s flexi-access drawdown pension can only be paid from a defined contribution arrangement. The rest are all potential options from a scheme pension. - Chapter 7, Section C1E, Learning Outcome 5
Susan is considering purchasing a lifetime annuity. HM Revenue & Customs (HMRC) requires that the annuity must be
A. payable for the member’s life.
B. purchased from a list of HMRC approved annuity providers.
C. paid at least once a year in advance.
D. capable of assignment and surrender in any circumstances.
A. payable for the member’s life.
A lifetime annuity must be payable for the member’s lifetime. The annuity can be bought from a provider of the member’s choosing; it is not possible to assign or surrender the annuity and payment must be made at least annually in arrears. - Chapter 7, Section C2A, Learning Outcome 6
Adam is 63 and is considering using his personal pension fund to purchase a lifetime annuity. According to HM Revenue & Customs (HMRC) requirements, what is the statutory escalation that must be included?
A. There is no statutory escalation requirement.
B. By RPI.
C. By RPI or 2.5%.
D. By CPI or 5%.
A. There is no statutory escalation requirement.
There is no statutory escalation rate for a lifetime annuity purchased from a personal pension fund. - Chapter 7, Section C2A, Learning Outcome 6
Alex, an accountant, has the following preserved pension entitlements
Employer Type of Scheme Transfer Value
Fresher Foods Ltd - Final salary defined benefit - £8,200
Ace Automobiles Ltd - Career average defined benefit - £12,000
Clear Telecoms Ltd - Occupational defined contribution - £5,000
Excel Accounting - Group Personal Pension - £7,500
Self - Personal pension - £8,000
He should be aware that (Tick all that apply.)
A. only his defined benefit schemes can be taken as small pots.
B. his group personal pension does not meet small pots criteria.
C. he can take all except the Ace Automobiles pension as small pots.
D. small pots payments are not treated as Benefit Crystallisation Events.
C. he can take all except the Ace Automobiles pension as small pots.
D. small pots payments are not treated as Benefit Crystallisation Events.
A member may take an unlimited number of occupational pensions (provided they are unconnected) and up to three non-occupational pensions as small pots. However, these funds must be valued at less than £10,000. Small pots payments are not BCEs and are not tested against the lifetime allowance. - Chapter 7, Section B, Learning Outcome 6
An impaired life annuity is most likely to be suitable for
A. Dave, who has had two strokes.
B. Martha, who smokes 20 a day.
C. Jean, who has a family history of heart disease.
D. Eric, who suffers from asthma.
A. Dave, who has had two strokes.
An impaired life annuity may be available to those who have a lower-than-average life expectancy because they are suffering from certain health conditions, such as having had strokes. Asthma would not be considered serious enough to impact life expectancy. Smoking is considered a lifestyle factor and family history would not be sufficient to class a life as impaired if that person did not have any specific ailments themselves. - Chapter 7, Section C2G, Learning Outcome 6
Julian has recently died having been a member of a defined benefit pension scheme for 25 years. Following his death, Julian’s beneficiaries should be aware that the scheme can provide benefits (Tick all that apply).
A. as a dependant’s scheme pension
B. through a guarantee period
C. as a pension protection lump sum
D. as an annuity protection lump sum
A. as a dependant’s scheme pension
B. through a guarantee period
C. as a pension protection lump sum
There are three ways a scheme pension can provide benefits following the member’s death; a dependant’s scheme pension, a guarantee period, and a lump sum death benefit. As it is a defined benefit scheme the lump sum is either a defined benefits lump sum death benefit or a pension protection lump sum. An annuity protection lump sum is payable from a scheme pension from a defined contribution scheme. - Chapter 7, Section C1E, Learning Outcome 6
Fred has a conventional lifetime annuity. Fred should be aware that the income he receives could fall compared to that paid in a previous year if he (Tick all that apply.)
A. has just married.
B. chose a with profit annuity at outset.
C. chose an annuity linked to RPI.
D. has reached the end of the guarantee period.
B. chose a with profit annuity at outset.
C. chose an annuity linked to RPI.
Under a with profit annuity, if the provider bonus rate falls, the annuity payment may decrease the following year. If an annuity is linked to RPI and RPI falls below zero, the annuity income will also be less than the previous year. - Chapter 7, Section C2B, Learning Outcome 6
Jack’s annuity has been calculated on a points system using an automated basis in relation to his lifestyle. This would indicate the purchase of
A. an enhanced annuity.
B. a joint life annuity.
C. a protected rights annuity.
D. an impaired annuity.
A. an enhanced annuity.
If Jack’s annuity was calculated based on a points system, this would indicate the purchase of an enhanced annuity. The points system offers higher annuity rates by medically underwriting the individual based on a generic points system rather than an individual’s medical record (as with impaired life annuities). - Chapter 7, Section C2G, Learning Outcome 6
