Learning outcome 2 Flashcards
- Terry has various debts, including a mortgage, a credit card, a secured personal loan and a hire purchase finance agreement on his car. When considering how he might reduce his outgoings, he should be aware that
A. the secured loan cannot be repaid until his mortgage is repaid.
B. debt consolidation may involve increasing the term of his repayments.
C. an introductory deal on a credit card is always available.
D. a hire purchase agreement cannot be repaid before the end of the term.
B
- A client is considering mortgage payments for both capital and interest and interest-only mortgages. He should be aware that if interest rates stay constant throughout the mortgage term,
compared to a capital and interest mortgage, an interest-only mortgage will result in
A. a lower monthly cost, but a higher overall borrowing cost.
B. a higher monthly cost, but a lower overall borrowing cost.
C. both a lower monthly and overall borrowing cost.
D. both a higher monthly and overall borrowing cost.
A
- Michael, aged 27, has recently purchased a property with a mortgage on a capital and interest basis. He is single and has no dependants and is employed by the local authority. Michael’s main priority is most likely to be arranging an
A. amount of life assurance that remains constant over the term of the loan.
B. amount of life assurance that reduces over the term of the loan.
C. amount of income protection insurance sufficient to continue meeting the mortgage payments.
D. investment vehicle to create a lump sum to repay the mortgage at the end of the term.
C
- Claire, aged 38, is concerned about funding the future further education costs for her children, aged
9 and 10. When considering an appropriate timescale for any investment and reflecting her
medium attitude to risk, she is most likely to consider using
A. instantly-accessible deposit accounts providing a guaranteed return.
B. a range of tax-efficient savings plans investing in a range of investment types.
C. contributing to a personal pension plan and drawing income to fund her children’s education
costs.
D. an equity release arrangement secured on her home to fund the education costs.
B
- John, aged 64, is married to Margaret, aged 62, and they are both approaching retirement. They have always worked for the same company and have both accrued pension benefits through the company’s group money purchase scheme. If they both purchase annuities at retirement and both
wish to receive the maximum possible income level, they should both select
A. an index-linked annuity payable on a single-life basis with no guarantee.
B. an index-linked annuity payable on a joint-life basis with a 10-year guarantee.
C. a level annuity on a single-life basis with no guarantee.
D. a level annuity on a joint-life basis with a 10-year guarantee.
C
- Geoffrey and Andrew are brothers and have both retired. All of Geoffrey’s retirement income, but
only part of Andrew’s, is treated as earned income. This is because
A. Andrew was an employee, Geoffrey was self-employed.
B. Geoffrey is aged 59, Andrew is aged 69.
C. only Andrew receives two forms of State Pension.
D. only Andrew took out a purchased life annuity with the funds raised from his pension
commencement lump sum entitlement.
D
- When considering estate and Inheritance Tax planning for a retired couple, who have no outstanding debts or liabilities and a substantial estate, their first priority should be
A. arranging a joint whole of life assurance policy under trust and payable on a second death basis
to cover the potential tax liability.
B. ensuring that they have sufficient resources to pay for long-term care.
C. starting to gift assets outside of the estate using annual exemptions.
D. writing a valid will.
D
- Bob and Gillian, both aged 28, have recently arranged an interest-only mortgage on their first home
which they intend to repay with the proceeds of a trust fund that Bob will receive when he attains the age of 35. To ensure that this loan is adequately protected in the event of death before the trust fund is distributed, the most suitable arrangement is likely to be
A. a reducing term assurance policy on Bob’s life only for the outstanding mortgage amount.
B. a level term assurance policy on a joint-life basis for the outstanding mortgage amount.
C. an income protection insurance policy for both of them to cover the monthly repayments.
D. a whole of life assurance policy on Bob’s life only for the outstanding mortgage amount.
B
- Kim and Richard have two children, aged five and seven. They have no outstanding mortgage and Richard is the sole wage earner. To ensure that Kim is able to continue looking after the children in
the event of Richard’s death, they should consider a family income benefit policy based on
A. Richard’s life and his income level.
B. Kim’s life and her income requirement.
C. Richard’s life and Kim’s income requirement.
D. Kim’s life and her expenditure.
C
- Jerry, a 37-year-old higher-rate taxpayer, is looking to provide a lump sum in the future, for the benefit of his 15-year-old son, Paul, when he finishes further education at the age of 22. Jerry wishes to invest £10,000 per annum. It is likely that the most tax-efficient method of achieving this would be to consider
A. taking the pension commencement lump sum from his pension scheme.
B. arranging an onshore life assurance bond and assigning the value to Paul at the age of 22.
C. utilising his own ISA allowances and gifting the proceeds to Paul at the age of 22.
D. investing in a Junior ISA.
C
- Currently, maximum entitlement to the state pension is determined by
A. a complete National Insurance contribution record for the entire working life of the individual.
B. a complete National Insurance contribution record for a specific period of the working life of the individual.
C. the amount of Class 2 National Insurance contributions that have been paid by the individual.
D. the amount of Class 4 National Insurance contributions that have been paid by the individual.
B
- A self-employed jeweller wanting to purchase a shop using his pension scheme should consider a
A. Retirement Annuity Contract.
B. Section 32 buy-out bond.
C. self-invested personal pension (SIPP).
D. small self-administered scheme (SSAS).
C
