Test Questions Flashcards by Davis Geidans

Harry and Edward both used personal pension funds valued at £250,000 to purchase a lifetime annuity on a single life basis with no escalation. Harry receives £22,500 p.a. but Edward only receives £13,500 p.a. because Harry purchased his lifetime annuity in:

a.
1990, whereas Edward purchased his lifetime annuity in 2022.

b.
2022, whereas Edward purchased his lifetime annuity in 2000.

c.
2000, whereas Edward purchased his lifetime annuity in 2022.

d.
1990, whereas Edward purchased his lifetime annuity in 2000.

c.
2000, whereas Edward purchased his lifetime annuity in 2022.

How well did you know this?

Not at all

Perfectly

Ajay is about to retire and take benefits from his employer’s defined benefit scheme. The calculation of the pension he will receive will NOT take into account:

a.
the scheme’s underlying investment returns.

b.
the scheme’s accrual rate.

c.
Ajay’s final pensionable remuneration.

d.
Ajay’s pensionable service in the scheme.

a.
the scheme’s underlying investment returns.

How well did you know this?

Not at all

Perfectly

What is an example of a ‘hybrid’ scheme?

a.
Executive pension plan.

b.
Section 32 contract.

c.
Targeted money purchase scheme.

d.
Small self-administered scheme.

c.
Targeted money purchase scheme.

How well did you know this?

Not at all

Perfectly

What was NOT replaced by the new State Pension when it was introduced in April 2016?

a.
State Guarantee Credit.

b.
State Second Pension.

c.
Basic State Pension.

d.
State Savings Credit.

a.
State Guarantee Credit.

How well did you know this?

Not at all

Perfectly

An individual’s defined benefit pension scheme has closed to future accrual and they are now a member of their employer’s group personal pension plan [GPP]. What new risks, if any, does the individual now face?

a.
Annuity risk only.

b.
Investment and annuity risk.

c.
Investment risk only.

d.
No new risk

b.
Investment and annuity risk.

How well did you know this?

Not at all

Perfectly

How many years of National Insurance Contributions must be paid [or have been credited] for an individual to qualify for the full new State pension?

a.
45.

b.
35.

c.
30.

d.
40.

b.
35.

How well did you know this?

Not at all

Perfectly

A company runs a defined benefit scheme that was contracted out prior to 6 April 2016. How, if at all, has the abolition of contracting out affected the National Insurance Contributions [NICs] payable by the employer and the employees?

a.
Both the employer and the employees’ NICs have reduced.

b.
The employer’s NICs have increased, but there has been no change to the employees’ NICs

c.
Both the employer and the employees’ NICs have increased.

d.
There has been no change to the employer’s NICs, but the employees’ NICs have increased.

c.
Both the employer and the employees’ NICs have increased.

How well did you know this?

Not at all

Perfectly

Which government initiative has increased the attractiveness of pension saving in the UK?

a.
The abolition of contracting out under defined benefit schemes.

b.
The introduction of pension flexibility for defined contribution schemes.

c.
The replacement of many defined benefit schemes with defined contribution alternatives.

d.
The introduction of the new State Pension.

b.
The introduction of pension flexibility for defined contribution schemes.

How well did you know this?

Not at all

Perfectly

What pension option pays an income for life, but can be reduced in circumstances set out in the contract?

a.
Capped drawdown pension.

b.
Flexible lifetime annuity.

c.
Scheme pension.

d.
Flexi-access drawdown pension.

b.
Flexible lifetime annuity.

How well did you know this?

Not at all

Perfectly

What typically is the main reason cited for the lack of savings made into pensions?

a.
Lack of access to a defined benefit scheme.

b.
Lack of affordability.

c.
High charges on pension contracts.

d.
Mistrust of the industry.

b.
Lack of affordability.

How well did you know this?

Not at all

Perfectly

Prior to 6 April 2016, which additional State Pension could be accrued by the employed, carers and some long-term disabled people who had broken work records?

a.
Basic State pension.

b.
State Earnings Related Pension Scheme.

c.
State Graduated Pension Scheme.

d.
State Second Pension

How well did you know this?

Not at all

Perfectly

When calculating the total pension input for a defined benefit pension scheme, what factor is the closing pension input value multiplied by?

a.
20 and this value is increased in line with CPI.

b.
16 and this value is not increased in line with CPI.

c.
16 and this value is increased in line with CPI.

d.
20 and this value is not increased in line with CPI.

b.
16 and this value is not increased in line with CPI.

How well did you know this?

Not at all

Perfectly

Which client would HMRC regard as having recycled their pension commencement lump sum [PCLS]?

a.
Teresa, who has not made any contributions for several years, receives a PCLS of £30,000 and shortly afterwards decides to recycle £10,000 into a personal pension.

b.
Ernest, who makes pension contributions of £1,000 per month, receives a PCLS of £25,000 and shortly afterwards decides to recycle £5,000 into his personal pension plan.

c.
Kevin, who has not made any contributions for several years, receives a PCLS of £5,000 and shortly afterwards decides to recycle £2,000 into a personal pension plan.

d.
Miranda, who makes pension contributions of £100 per month, receives a PCLS of £50,000 and shortly afterwards decides to recycle £10,000 into a personal pension plan.

a.
Teresa, who has not made any contributions for several years, receives a PCLS of £30,000 and shortly afterwards decides to recycle £10,000 into a personal pension.

How well did you know this?

Not at all

Perfectly

Sophie’s capped drawdown pension commenced in 2005 and is still a capped drawdown pension when she crystallises further benefits in 2022/23. For lifetime allowance purposes, her pension will be valued as the:

a.
maximum annual income withdrawal x 25.

b.
current market value of the fund.

c.
maximum annual income withdrawal x 20 x 80%.

d.
maximum annual income withdrawal x 25 x 80%.

How well did you know this?

Not at all

Perfectly

Andre, aged 62, has threshold income of £185,000 and adjusted income of £244,000 in 2022/23. What is his annual allowance in the current tax year?

a.
£40,000.

b.
£38,000.

c.
£36,000.

d.
£4,000.

a.
£40,000.

How well did you know this?

Not at all

Perfectly

Jean receives an annual salary of £55,000 and also has a company car with a taxable value of £5,000. If she pays £5,500 gross into a personal pension, what is her adjusted net income?

a.
£49,500.

b.
£60,000.

c.
£54,500.

d.
£55,000.

c.
£54,500.

How well did you know this?

Not at all

Perfectly

What percentage of the lifetime allowance was used in June 2006 if an individual received a pension commencement lump sum of £150,000 plus a scheme pension of £50,000 p.a.?

a.
83.33%.

b.
76.66%.

c.
93.33%.

d.
23.33%.

b.
76.66%.

How well did you know this?

Not at all

Perfectly

If a self-employed higher rate taxpayer makes a personal pension contribution in 2022/23, when will they receive the higher rate tax relief?

a.
31 July 2022.

b.
31 July 2023.

c.
31 January 2024.

d.
31 January 2023.

c.
31 January 2024.

How well did you know this?

Not at all

Perfectly

In 2022/23 Maud receives a salary of £230,000 and has gross dividend income of £12,000. She contributes £25,000 into a personal pension plan in 2022/23 and her employer contributes £5,000. What is Maud’s adjusted income for tapered annual allowance purposes?

a.
£242,000.

b.
£272,000.

c.
£267,000.

d.
£247,000.

How well did you know this?

Not at all

Perfectly

Fiona, aged 50, wishes to transfer the benefits held in her previous employer’s defined benefit pension scheme to a qualifying recognised overseas pension scheme in Spain. Fiona has been resident in Spain since 2015. She has been informed that the current preserved pension is £15,000 p.a. and that the transfer value is £210,000. In respect of the lifetime allowance this transfer will be:

a.
ignored until she takes an income or cash lump sum from the pension in Spain.

b.
valued at £210,000.

c.
valued at £375,000.

d.
valued at £300,000.

b.
valued at £210,000.

How well did you know this?

Not at all

Perfectly

Individuals may be entitled to a higher lifetime allowance in a range of circumstances, except when they have:

a.
registered for enhanced protection.

b.
transferred benefits in from recognised overseas pension schemes.

c.
registered for fixed protection 2012, 2014 or 2016.

d.
registered for primary protection.

a.
registered for enhanced protection.

How well did you know this?

Not at all

Perfectly

An individual makes regular contributions to his employer’s group personal pension plan [GPP] and occasional lump sum payments into a retirement annuity contract [RAC]. Assuming the RAC provider has not changed its method of awarding tax relief since the plan started, pension tax relief will be awarded:

a.
using the net pay method for the GPP and through his self-assessment tax return for the RAC.

b.
through the relief at source method for the GPP and through his self-assessment tax return for the RAC.

c.
using the net pay method for the GPP and the relief at source method for the RAC.

d.
through his self-assessment tax return for both the GPP and the RAC.

b.
through the relief at source method for the GPP and through his self-assessment tax return for the RAC.

How well did you know this?

Not at all

Perfectly

If four clients are all UK residents and have not made any application for transitional protection, which of them will be entitled to an enhancement to the standard lifetime allowance?

a.
Charles, who is a Member of Parliament.

b.
Jane, who has elected to work until she is 75 years of age.

c.
Martin, who has transferred benefits in from a recognised overseas pension scheme.

d.
Muriel, who is a controlling director, and will have earnings in excess of £500,000 p.a. for the five years leading into retirement.

c.
Martin, who has transferred benefits in from a recognised overseas pension scheme.

How well did you know this?

Not at all

Perfectly

Asif, aged 63, has fixed protection 2012 and in 2022/23 he crystallises his only pension plan, which is valued at £2,100,000. What lifetime allowance charge will be payable if the excess above his lifetime allowance is taken as a lump sum?

a.
£330,000.

b.
£150,000.

c.
£75,000.

d.
£165,000.

How well did you know this?

Not at all

Perfectly

An overseas transfer charge may apply to transfers from a UK registered pension scheme to a QROPS. Where this charge applies, it will be at the rate of: a. 25% and will be applied to the residual fund after any lifetime allowance charge has been paid. b. 55% and will be applied to the full fund before any lifetime allowance charge has been paid. c. 25% and will be applied to the full fund before any lifetime allowance charge has been paid. d. 55% and will be applied to the residual fund after any lifetime allowance charge has been paid.

a. 25% and will be applied to the residual fund after any lifetime allowance charge has been paid.

Jack will become entitled to a scheme pension from his company's defined benefit scheme on 1 February 2023. Between what dates must the associated lump sum be paid if it is to be considered a pension commencement lump sum? a. 1 February 2023 and 1 August 2024. b. 1 February 2023 and 31 January 2024. c. 1 August 2022 and 31 January 2024. d. 1 August 2022 and 31 January 2023.

c. 1 August 2022 and 31 January 2024.

From which types of pension arrangements can a trivial commutation lump sum be paid? a. A defined benefit scheme or an uncrystallised defined contribution fund. b. An uncrystallised defined contribution fund or a lifetime annuity payable to a member of a defined contribution scheme. c. A defined benefit scheme or an in-payment money purchase in-house scheme pension . d. An uncrystallised defined contribution fund or an in-payment money purchase in-house scheme pension.

c. A defined benefit scheme or an in-payment money purchase in-house scheme pension .

How were defined benefit scheme pensions already in payment on 5 April 2006 valued for the purposes of primary protection? a. Scheme pension multiplied by a factor of 25. b. Scheme pension multiplied by a factor of 20. c. Scheme pension multiplied by a factor of 25 plus PCLS added at its face value. d. Scheme pension multiplied by a factor of 20 plus PCLS added at its face value.

a. Scheme pension multiplied by a factor of 25.

On 5 April 2006 Connor had pension funds valued at £1,550,000 and an entitlement to a pension commencement lump sum [PCLS] of £400,000. He registered for primary protection. In 2022/23 Connor's pension fund is valued at £1,720,000 so his maximum permitted PCLS will be: a. £450,000. b. £375,000. c. £430,000. d. £480,000.

d. £480,000.

Fiona, aged 53, holds fixed protection 2014. On 1 October 2022 Fiona set up a new defined contribution pension arrangement. Her fixed protection was NOT invalidated because: a. the contributions paid into the new arrangement were for life cover only. b. the scheme was set up to accept a transfer of her existing pension rights. c. her total fund is now less than £1.5m. d. the contributions being paid into the new scheme are employer contributions.

b. the scheme was set up to accept a transfer of her existing pension rights.

Francesco's occupational pension scheme, which offers all of the flexible access options, has a protected pension age of 50. If he decides to take his benefits at age 50, he should be aware that: a. he will only be able to draw his income in the form of a lifetime annuity or scheme pension. b. he must take all of his benefits from the scheme in full. c. he will lose the right to take a pension commencement lump sum. d. his lifetime allowance will be reduced.

b. he must take all of his benefits from the scheme in full.

In what circumstances, if any, can primary protection be lost? a. Contributions are made or benefits continue to accrue after 5 April 2006. b. The member does not crystallise all of their benefits at the same time. c. The member's pension is subject to a pension debit after 5 April 2006 and the reduced value of the member's benefits falls below £1.5m. d. In no circumstances.

c. The member's pension is subject to a pension debit after 5 April 2006 and the reduced value of the member's benefits falls below £1.5m.

Lucy had pension rights valued at £2,400,000 on 5 April 2006 and applied for primary protection. Lucy crystallises her benefits in 2022/23 when they are valued at £3,000,000. What amount, if anything, will be subject to the lifetime allowance charge? a. £120,000. b. Nil. c. £600,000. d. £890,000.

a. £120,000. Lifetime allowance + (lifetime allowance x 0.2)

Hugh had pension benefits valued at £1,875,000 on 5 April 2006 and he registered for primary protection. What is Hugh's personal lifetime allowance in 2022/23? a. £2,250,000. b. £2,343,750. c. £1,341,375. d. £1,875,000.

a. £2,250,000. (5 April 2006 value - £1.5M) / £1.5M

How are investments that are held within a pension fund taxed? a. Income tax will be paid on trading income. b. Income tax will be paid on cash deposits. c. Capital gains tax will be paid on disposal of assets. d. Income tax will be paid on investment income.

a. Income tax will be paid on trading income.

Where a scheme pension is paid directly from a defined contribution arrangement, in what circumstances is the money purchase annual allowance triggered? a. Where there are more than ten other members in receipt of a scheme pension and the member became eligible to receive the scheme pension before 6 April 2015. b. Where there are fewer than eleven other members in receipt of a scheme pension and the member became eligible to receive the scheme pension before 6 April 2015. c. Where there are more than ten other members in receipt of a scheme pension and the member became eligible to receive the scheme pension on or after 6 April 2015. d. Where there are fewer than eleven other members in receipt of a scheme pension and the member became eligible to receive the scheme pension on or after 6 April 2015.

d. Where there are fewer than eleven other members in receipt of a scheme pension and the member became eligible to receive the scheme pension on or after 6 April 2015.

Caitlin, who is 67, has taxable income of £15,000 in 2022/23. She has an uncrystallised personal pension fund of £9,000, which she would like to take as a small pots payment. How much, net of tax, will Caitlin receive? a. £9,000. b. £7,650. c. £5,400. d. £7,200.

b. £7,650. 25 tax free and 75% taxable 0.75 x £9000 x 0.20 (tax rate)

Why might it NOT be possible for a 62 year old who has a personal pension valued over the current lifetime allowance to apply for individual protection 2016? a. They have made contributions into a personal pension plan since 6 April 2016. b. They have primary protection. c. Their pension savings were valued at £1.35m on 5 April 2016. d. The deadline for applying for individual protection 2016 has passed.

b. They have primary protection.

Who can be included as the contingent interest on a joint life annuity purchased by an individual using uncrystallised funds? a. A dependant or a nominee. b. A nominee or a successor. c. A dependant, a nominee or a successor. d. A dependant only.

a. A dependant or a nominee.

Liz died in July 2022 at the age of 72. Her husband used her uncrystallised personal pension fund to purchase a dependant's annuity in October 2022. The annuity income will be: a. tax free and the value of the uncrystallised funds will be tested against Liz's remaining lifetime allowance. b. taxed as her husband's pension income via PAYE and the value of the uncrystallised funds will be tested against Liz's remaining lifetime allowance. c. tax free and there will be no test against Liz's remaining lifetime allowance. d. taxed as her husband's pension income via PAYE and there will be no test against Liz's remaining lifetime allowance.

a. tax free and the value of the uncrystallised funds will be tested against Liz's remaining lifetime allowance.

On 5 April 2006 Jim's pension benefits were valued at £1.7m and he registered for primary protection. However, in 2022/23 Jim's primary protection has been lost. This is because: a. Jim has started to make contributions into a personal pension plan. b. Jim's employer has put death in service cover in place for Jim. c. Jim has recently divorced and his pension fund was subject to a pension debit of £500,000. d. the value of Jim's fund has now fallen below £1.5m

c. Jim has recently divorced and his pension fund was subject to a pension debit of £500,000.

Dan designated his personal pension plan into flexi-access drawdown in May 2022. He died in November 2022 at the age of 71. As his nominated beneficiary, his son Elliott, aged 42, elects to designate the funds to a nominee's flexi-access drawdown plan. Any withdrawals Elliott takes will be: a. taxed as Elliott's pension income via PAYE and there will be no test against Dan's remaining lifetime allowance. b. received free of income tax and the value of the flexi-access drawdown fund will be tested against Dan's remaining lifetime allowance. c. taxed as Elliott's pension income via PAYE and the value of the flexi-access drawdown fund will be tested against Dan's remaining lifetime allowance. d. received free of income tax and there will be no test against Dan's remaining lifetime allowance.

d. received free of income tax and there will be no test against Dan's remaining lifetime allowance.

A scheme member has been informed they must pay an unauthorised payments surcharge. This is because the unauthorised payments made in the last year exceed what percentage of the member's pension rights under the scheme? a. 40%. b. 15%. c. 25%. d. 55%.

c. 25%.

Certain members of occupational pension schemes are entitled to take their benefits from the age of 50 as long as this contractual right was in the scheme rules before what date? a. 10 December 2003. b. 6 April 2003. c. 10 December 2006. d. 6 April 2006.

a. 10 December 2003.

To avoid them becoming taxable, death benefits from an uncrystallised defined contribution pension must be designated to an income producing contract or paid out as a lump sum death benefit within a certain timeframe. What is this timeframe? a. The earlier of two years from the date the scheme administrator is notified of the death, or could reasonably be expected to have known about the death. b. Two years from the date of the death. c. 18 months from the date of the death. d. The earlier of 18 months from the date the scheme administrator is notified of the death, or could reasonably be expected to have known about the death.

a. The earlier of two years from the date the scheme administrator is notified of the death, or could reasonably be expected to have known about the death

Marcus died in August 2022 at the age of 76. The nominated beneficiary for his unused personal pension fund is his daughter Sally, who takes the entire fund as a lump sum in November 2022. The lump sum death benefit will be: a. paid free of tax and there will be no test against Marcus' remaining lifetime allowance. b. taxable as Sally's pension income via PAYE and there will be no test against Marcus' remaining lifetime allowance. c. taxable as Sally's pension income via PAYE and the value of the unused funds will be tested against Marcus' remaining lifetime allowance. d. paid free of tax, but the value of the unused funds will be tested against Marcus' remaining lifetime allowance.

b. taxable as Sally's pension income via PAYE and there will be no test against Marcus' remaining lifetime allowance.

What type of pension CANNOT pay death benefits to a nominee? a. Lifetime annuity. b. Capped drawdown. c. Scheme pension. d. Flexi-access drawdown.

c. Scheme pension.

Clive died on 1 September 2022, age 74, with an uncrystallised personal pension fund of £2.15m. He had not registered for any form of transitional protection. His wife decides to use the fund to purchase an annuity and the first income payment is paid in December 2022. If any excess above the lifetime allowance is taken as a lump sum, what lifetime allowance charge, if any, will be payable? a. £269,225. b. £592,295. c. £484,605. d. Nil.

b. £592,295

A member of a small self-administered scheme has been told that a proposed investment is not permitted because it is deemed to be taxable property. What is the proposed investment? a. A residential property. b. Shares in the member's own company. c. Listed company shares. d. A commercial property.

a. A residential property.

The maximum scheme sanction charge payable by a scheme administrator is what percentage of the chargeable payment? a. 45%. b. 40%. c. 15%. d. 25%.

b. 40%.

What conditions must apply if an uncrystallised funds pension lump sum [UFPLS] is to be taken after the member reaches the age of 75? a. It can be taken from funds that were not crystallised before age 75 or from undrawn funds and the member must have some of their lifetime allowance remaining. b. It can be taken from funds that were not crystallised before age 75 or from undrawn funds and the member must have enough of their lifetime allowance remaining to cover the full amount of the UFPLS. c. It can only be taken from funds that were not crystallised before age 75 and the member must have some of their lifetime allowance remaining. d. It can only be taken from funds that were not crystallised before age 75 and the member must have enough of their lifetime allowance remaining to cover the full amount of the UFPLS.

c. It can only be taken from funds that were not crystallised before age 75 and the member must have some of their lifetime allowance remaining.

What is the tax treatment of a small pots payment made in respect of crystallised benefits? a. 25% is tax free, with the balance taxed as the member's pension income via PAYE and it is not tested against the member's lifetime allowance. b. 25% is tax free, with the balance taxed as the member's pension income via PAYE and it is tested against the member's lifetime allowance. c. It is taxed as the member's pension income via PAYE and it is tested against the member's lifetime allowance. d. It is taxed as the member's pension income via PAYE and it is not tested against the member's lifetime allowance.

d. It is taxed as the member's pension income via PAYE and it is not tested against the member's lifetime allowance.

If an individual had benefits valued at £2.1m on 5 April 2006 and applied for primary protection, what is their primary protection factor? a. 28.6%. b. 71.4%. c. 40%. d. 60%.

c. 40%.

Jane has been awarded an earmarked periodic payment from her ex-husband's pension scheme. She should be aware that: a. the income payments will be paid to her after tax at her ex-husband's marginal rate has been deducted. b. she retains the right to these payments if she remarries. c. she is entitled to receive a transfer value for these benefits. d. if her ex-husband remarries the payments will stop.

a. the income payments will be paid to her after tax at her ex-husband's marginal rate has been deducted.

A retired member of a defined benefit scheme that has entered the Pension Protection Fund can expect their pension income to increase in line with CPI capped at: a. 2.5% for benefits accrued after 5 April 1997 and no increases for benefits accrued prior to 6 April 1997. b. 5% for benefits accrued after 5 April 1997 and no increases for benefits accrued prior to 6 April 1997. c. 5% for benefits accrued after 5 April 1997 and CPI capped at 2.5% for benefits accrued prior to 6 April 1997. d. 2.5% for benefits accrued after 5 April 1997 and CPI capped at 5% for benefits accrued prior to 6 April 1997.

a. 2.5% for benefits accrued after 5 April 1997 and no increases for benefits accrued prior to 6 April 1997.

Kelly has received a pension credit that relates to her ex-husband's membership of the Civil Service Pension Scheme. As a result the scheme must offer her: a. the choice between membership of the scheme and receiving a transfer value. b. membership of the scheme but can choose not to offer her a transfer value. c. either membership of the scheme or a transfer value but it is up to the scheme to decide which. d. a transfer value but they can choose not to offer her membership of the scheme.

b. membership of the scheme but can choose not to offer her a transfer value.

The National Employment Savings Trust [NEST] and The People's Pension are multi-employer master trust schemes. Which of these schemes, if any, is UNABLE to decline business it feels will be unprofitable? a. Neither are able to decline business that is felt to be unprofitable. b. Both are able to decline business that is felt to be unprofitable. c. The People's Pension only. d. NEST only.

d. NEST only.

Following an action by Fiona's insurer in May 2022, she complained to the Financial Ombudsman Service [FOS]. The maximum monetary award the FOS can enforce is: a. £375,000 in total, including interest and costs. b. £375,000 plus interest and costs. c. £355,000 in total, including interest and costs. d. £355,000 plus interest and costs.

b. £375,000 plus interest and costs.

If the Pension Protection Fund is to take responsibility for a scheme a number of requirements must be met. One of these is that the scheme must NOT have commenced wind-up before: a. 1 January 2005. b. 6 April 2006. c. 1 January 2006. d. 6 April 2005.

d. 6 April 2005.

Megan and her employer both contribute 5% of her salary into a defined contribution scheme. Megan has just started her maternity leave and she plans to return to work after six months. Her employer will pay her full salary of £2,000 per month for three months and this will reduce to £1,000 for the remaining three months. Regarding the contributions made into the scheme during her period of maternity leave, Megan: a. will pay £100 per month for the first three months and £50 per month for the next three months. Her employer will contribute £100 per month for the entire six month period. b. and her employer will pay £100 per month for the entire six month period. c. and her employer will pay £100 per month for the first three months and £50 per month for the next three months. d. will not have to make any pension contributions during her period of maternity leave, but her employer will be required to pay £100 per month for the entire six month period.

a. will pay £100 per month for the first three months and £50 per month for the next three months. Her employer will contribute £100 per month for the entire six month period.

Which employee would be classed as a non-eligible jobholder for automatic enrolment purposes? a. Julie, who is 29 and has earnings of £15,000. b. Harry, who is 67 and has earnings of £24,000. c. Hee-Jin, who is 48 and has part time earnings of £5,000. d. Angus, who is 64 and has earnings of £45,000.

b. Harry, who is 67 and has earnings of £24,000.

What is the minimum postponement period a workplace pension can use to defer the date on which it assesses a worker? a. One day. b. One week. c. Three months. d. One month.

a. One day.

Which individual would have their complaint investigated by The Pensions Ombudsman? a. Bryan, who is unhappy with the way a trustee of his employer's occupational pension scheme is carrying out his duties. b. John, who is about to retire and feels that his State pension forecast does not take full account of his Class 1 National Insurance Contribution record. c. Reg, who feels the charges on his employer's in-house AVC scheme are too high. d. Barbara, who feels she was mis-sold her personal pension plan.

a. Bryan, who is unhappy with the way a trustee of his employer's occupational pension scheme is carrying out his duties.

Which of the State Pensions paid to individuals who reached their State Pension Age prior to 6 April 2016 can be included in a pension sharing order? a. State Second Pension and SERPS only. b. SERPS only. c. Basic State Pension, SERPS and State Second Pension. d. State Second Pension only.

a. State Second Pension and SERPS only.

John is declared bankrupt on 1 June 2022 and the trustee in bankruptcy applies for an income payments order that takes effect from 1 August 2022. The period of bankruptcy ends on 31 May 2023. If the income payments order is for the maximum term allowed, when must it end by? a. 31 July 2023. b. 31 July 2025. c. 31 May 2025. d. 31 May 2023.

b. 31 July 2025.

When a transfer value comparator [TVC] is calculated, an assumption is needed for a relevant rate of return. Who is responsible for setting this rate? a. The scheme actuary. b. The financial adviser. c. The FCA. d. The Pensions Regulator.

c. The FCA.

Which public sector scheme allows a deferred member to transfer their benefits to a scheme that offers flexible benefits? a. Teachers' Pension Scheme. b. Local Government Pension Scheme. c. NHS Pension Scheme. d. Civil Service Pension Scheme.

b. Local Government Pension Scheme.

Which two of the public sector schemes are notionally funded? a. The Teachers' Pension Scheme and the NHS Pension Scheme. b. The Fire-fighters Pension Scheme and the Armed Forces Pension Scheme. c. The Local Government Pension Scheme and the Civil Service Pension Scheme. d. The Armed Forces Pension Scheme and the Police Pension Scheme.

a. The Teachers' Pension Scheme and the NHS Pension Scheme.

Under the Code of Good Practice that addresses the incentives offered by defined benefit schemes, it is NOT possible to run an incentive exercise on an opt out basis for scheme members once they reach: a. age 65. b. age 80. c. age 70. d. the scheme's normal retirement age.

b. age 80.

Most defined benefit schemes are required to formally appoint an auditor, an actuary and a fund manager. Which of these parties, if any, must be appointed by a scheme that is wholly invested in insurance policies and is earmarked? a. None of them. b. An actuary and fund manager only. c. An actuary only. d. An auditor and fund manager only.

a. None of them.

Public sector schemes have moved from a final salary basis to a career average revalued earnings basis. This change did NOT apply to members of public service schemes who were within: a. 10 years of their scheme's normal pension age on 1 April 2015. b. 15 years of their scheme's normal pension age on 1 April 2012. c. 10 years of their scheme's normal pension age on 1 April 2012. d. 15 years of their scheme's normal pension age on 1 April 2015.

c. 10 years of their scheme's normal pension age on 1 April 2012.

How are employees' contributions to a defined benefit scheme usually expressed? a. As a fixed monetary amount that usually remains constant. b. As a fixed monetary amount, although the amount may vary if the funding rate changes. c. As a percentage of pensionable salary that usually remains constant. d. As a percentage of pensionable salary, although the rate may vary if the funding rate changes.

c. As a percentage of pensionable salary that usually remains constant.

Which public sector scheme is funded, rather than notionally funded? a. The Police Pension Scheme. b. The Local Government Pension Scheme. c. The Teachers' Pension Scheme. d. The Armed Forces Pension Scheme.

b. The Local Government Pension Scheme.

Lionel, aged 75, is in serious ill health. He has benefits under a previous employer's defined benefit scheme that are yet to be drawn. He has been told that it will not be possible to commute these for a serious ill-health lump sum. This is most likely to be because: a. the scheme is underfunded and so the trustees have decided not to make the payment. b. his lifetime allowance check at age 75 has revealed that he has no remaining lifetime allowance. c. it is not possible to commute benefits under a defined benefit scheme for a lump sum payment. d. he has passed his 75th birthday and so can no longer commute his benefits for a serious ill-health lump sum.

b. his lifetime allowance check at age 75 has revealed that he has no remaining lifetime allowance.

When undertaking appropriate pension transfer analysis, what period of life expectancy should the analysis plan for? a. Average life expectancy for the client taken from mortality tables, taking into account the client's health. b. A reasonable period beyond the client's average life expectancy. c. Average life expectancy for the client as prescribed by the FCA. d. Age 100 in all cases.

b. A reasonable period beyond the client's average life expectancy.

Oliver is about to reach the normal pension age of his defined benefit scheme. He is entitled to a scheme pension of £48,000 p.a., which will escalate in payment each year in line with RPI. Alternatively, he has been offered pension increase exchange whereby he would receive a pension of £54,000 p.a. that only escalates in line with statutory requirements. In assessing this offer Oliver should be aware that: a. this offer is only likely to be of benefit to him if he is in good health with a family history of longevity. b. if he accepts the offer he will be subject to a lifetime allowance tax charge. c. all dependants' benefits associated with the scheme pension will be removed. d. his PCLS entitlement will be lower if the £54,000 pension is selected.

b. if he accepts the offer he will be subject to a lifetime allowance tax charge.

A defined benefit scheme offers members the option of a pension increase exchange. Under the Voluntary Code of Good Practice, what is the minimum time period members should be given to make up their minds? a. Two months. b. One month. c. Six weeks. d. Three months

d. Three months

yle was a member of his employer's defined benefit scheme from 1 May 1997 to 30 June 2012. The scheme revalues benefits at the statutory minimum rates. Kyle's benefits will be revalued in deferment in line with increases in the CPI capped at 5% for benefits accrued prior to 6 April: a. 2009 and 2.5% for benefits accrued after this date. b. 2003 and 2.5% for benefits accrued after this date. c. 2005 and 2.5% for benefits accrued after this date. d. 2007 and 2.5% for benefits accrued after this date.

a. 2009 and 2.5% for benefits accrued after this date.

Between what dates could a member of a contracted out defined benefit scheme accrue a guaranteed minimum pension? a. 6 April 1978 and 5 April 2016. b. 6 April 1988 and 5 April 2016. c. 6 April 1988 and 5 April 1997. d. 6 April 1978 and 5 April 1997.

d. 6 April 1978 and 5 April 1997.

n what year was the index used to calculate the statutory rate of revaluation changed from RPI to CPI? a. 2006. b. 2011. c. 2005. d. 2009.

b. 2011.

Additional voluntary contributions may be used to buy added years of service in a defined benefit scheme. What are the two main assumptions that the actuary will take into account when calculating the cost of buying one added year of service? a. Assumed salary increases and assumed investment growth. b. Assumed investment growth and expected longevity. c. Assumed salary increases and assumed future annuity rates. d. Expected longevity and assumed future annuity rates.

a. Assumed salary increases and assumed investment growth.

What is the name of the valuation that must be carried out when an employer suffers an insolvency event and the Pension Protection Fund [PPF] wish to establish whether the scheme has sufficient assets to pay benefits to at least the PPF level of compensation? a. Section 179. b. Section 143. c. IAS 19. d. FRS 17.

b. Section 143.

A member has recently received a cash equivalent transfer value [CETV] from his defined benefit scheme, which is lower than the CETV he received five years ago when he decided not to transfer. What is the most likely reason for this reduction? a. The annuity rate assumed by the scheme has reduced. b. The discount rate assumptions used by the scheme have increased. c. The member is five years' closer to the scheme's normal pension age. d. The revaluation rate assumptions used by the scheme have increased.

b. The discount rate assumptions used by the scheme have increased.

Brian, who is 59, has deferred benefits in a defined benefit scheme and wishes to transfer these benefits to a defined contribution scheme. The scheme trustees have told him that he has no statutory right to a transfer value. This is most likely to be because: a. the benefits are held in a scheme that was contracted out prior to 6 April 2016. b. he was only a member of the scheme for 18 months. c. the cash equivalent transfer value is in excess of £30,000. d. the scheme has a normal pension age of 60.

d. the scheme has a normal pension age of 60.

When advising on a potential transfer out of a defined benefit scheme an adviser must undertake an appropriate pension transfer analysis. On what date did this requirement come into force? a. 1 October 2019. b. 6 April 2019. c. 6 April 2018. d. 1 October 2018.

d. 1 October 2018.

The trustees of a defined benefit scheme received Harry's request for a transfer value on 3 August 2022. Since the value of Harry's safeguarded rights will exceed £30,000 the trustees must notify Harry that he must take independent advice. This notification must be provided no later than: a. 14 September 2022. b. 3 October 2022. c. 3 November 2022. d. 3 September 2022.

d. 3 September 2022.

Which action will NOT help reduce an existing deficit in a defined benefit scheme? a. Changing the definition of pensionable salary from 'final salary' to 'career average earnings' for future benefit accrual. b. Ceasing future benefit accrual. c. Extending the scheme's normal pension age. d. Changing the accrual rate from 1/80th to 1/60th.

d. Changing the accrual rate from 1/80th to 1/60th.

What is NOT likely to be a key factor when determining the structure of a pension scheme deficit recovery plan? a. The impact of the assumptions used when setting the recovery plan not being borne out in practice. b. The impact on the employer and its plans for sustainable growth. c. The likely benefits available to members should the employer be subject to an insolvency event in the short term. d. The need to eliminate at least 50% of the shortfall by a specified target date.

d. The need to eliminate at least 50% of the shortfall by a specified target date.

Julia, aged 29, was a member of her employer's defined benefit pension scheme for 18 months before leaving their employment. Regarding her benefits under the scheme, Julia must be offered: a. a short service refund but the scheme can choose whether to offer her a cash equivalent transfer value or a preserved pension. b. the choice between a short service refund and a preserved pension but the scheme can choose whether to offer her a cash equivalent transfer value. c. a cash equivalent transfer value but the scheme can choose whether to offer her a short service refund or a preserved pension. d. the choice between a cash equivalent transfer value and a short service refund but the scheme can choose whether to offer her a preserved pension.

c. a cash equivalent transfer value but the scheme can choose whether to offer her a short service refund or a preserved pension.

A defined benefit pension scheme can pay a defined benefits lump sum death benefit on a member's death in service. What, if anything, is the maximum that can be paid? a. The amount is unlimited and it is not subject to a check against the lifetime allowance regardless of the member's age at death. b. The maximum is four times the member's total remuneration, although it will be subject to a check against the lifetime allowance in the event of the member's death before the age of 75. c. The maximum is four times the member's total remuneration and it is not subject to a check against the lifetime allowance regardless of the member's age at death. d. The amount is unlimited, although it will be subject to a check against the lifetime allowance in the event of the member's death before the age of 75.

d. The amount is unlimited, although it will be subject to a check against the lifetime allowance in the event of the member's death before the age of 75.

A small self-administered scheme is permitted to lend what maximum percentage of its net assets to the sponsoring employer? a. 45%. b. 50%. c. 35%. d. 25%.

b. 50%.

Accumulation rates used in a statutory money purchase illustration are set by the: a. FCA and must be based on expected returns before the deduction of expenses or charges. b. FCA and must be based on expected returns after the deduction of expenses or charges. c. provider and must be based on expected returns before the deduction of expenses or charges. d. provider and must be based on expected returns after the deduction of expenses or charges.

c. provider and must be based on expected returns before the deduction of expenses or charges.

Angus, who is 58, has uncrystallised benefits in a previous employer's occupational defined contribution scheme. Angus has the statutory right to a transfer these benefits until: a. one year before the scheme's normal pension age. b. the date he crystallises the benefits. c. he reaches the age of 75. d. the scheme's normal pension age.

b. the date he crystallises the benefits.

When joining his new employer's stakeholder pension scheme, Vikram should be aware that: Select one or more: a. the maximum annual charge will be 1% of the value of the fund. b. the employer must contribute at least 5% of his basic salary. c. a lifestyle arrangement must be provided as the default investment option. d. the minimum contribution can be no higher than £20. e. the scheme must allow him to contribute by credit card.

c. a lifestyle arrangement must be provided as the default investment option. d. the minimum contribution can be no higher than £20.

All members of a defined contribution scheme must be sent a statutory money purchase illustration each year, unless they are a member of a: a. self-invested personal pension plan. b. personal pension plan. c. small self-administered scheme. d. stakeholder pension plan.

c. small self-administered scheme.

What factors should an individual consider when deciding how to take their benefits from an uncrystallised defined contribution scheme? Select one or more: a. If they purchase a lifetime annuity, they may get a better annuity rate on the open market. b. If they select an uncrystallised funds pension lump sum, they will not have to designate funds to a drawdown plan. c. They must be given the option of a scheme pension. d. If they take an uncrystallised funds pension lump sum, they will not receive a pension commencement lump sum. e. They may be able to select a series of short term annuities without having to designate any funds into a drawdown pension.

a. If they purchase a lifetime annuity, they may get a better annuity rate on the open market. b. If they select an uncrystallised funds pension lump sum, they will not have to designate funds to a drawdown plan. d. If they take an uncrystallised funds pension lump sum, they will not receive a pension commencement lump sum.

John wants to work beyond the selected pension age of his employer's group personal pension plan into which his employer contributes. What will happen with his membership of the scheme and his employer's contributions? a. John can remain a member of the scheme but the employer is no longer required to contribute. b. John's employer can insist that any further contributions are made to an individual stakeholder contract. c. John's employer can demand that John takes his benefits at the selected pension age. d. John can remain a member of the scheme and his employer must continue to contribute while John remains in employment with them.

d. John can remain a member of the scheme and his employer must continue to contribute while John remains in employment with them.

What payment method CANNOT be used to make monthly contributions into a stakeholder pension plan? a. Cheque. b. Debit card. c. Standing order. d. Direct debit.

d. Direct debit.

When a director compares a contract based self-invested personal pension plan [SIPP] and a small self-administered scheme [SSAS], they should be aware that: Select one or more: a. a SSAS can lend to the sponsoring employer but the SIPP cannot. b. a SIPP is an individual defined contribution scheme whereas a SSAS is an occupational defined contribution scheme. c. the benefits under a SSAS are earmarked but the benefits under a SIPP are not. d. greater levels of administration are required with a SSAS compared to a SIPP. e. both SIPPs and SSASs are regulated by The Pensions Regulator. f. the company can pay higher contributions into a SSAS than into a SIPP.

a. a SSAS can lend to the sponsoring employer but the SIPP cannot. b. a SIPP is an individual defined contribution scheme whereas a SSAS is an occupational defined contribution scheme. d. greater levels of administration are required with a SSAS compared to a SIPP.

With a statutory money purchase illustration, what assumptions are used for inflation and expenses at retirement? a. 2.5% p.a. for inflation and 2% of the value of the annuity for expenses at retirement. b. 2% p.a. for inflation and 4% of the value of the annuity for expenses at retirement. c. 2% p.a. for inflation and 2% of the value of the annuity for expenses at retirement. d. 2.5% p.a. for inflation and 4% of the value of the annuity for expenses at retirement.

d. 2.5% p.a. for inflation and 4% of the value of the annuity for expenses at retirement.

Gerry intends to make contributions of £500 per month into a personal pension and is considering a pension contribution insurance [PCI] policy. He should be aware that: Select one or more: a. PCI premiums are paid into a separate insurance contract. b. he will be eligible for tax relief on his PCI premiums. c. in the event of a claim he will receive tax relief in full on his monthly contributions. d. in the event of a claim the PCI contributions will be paid net of basic rate tax. e. in the event of a claim the PCI contributions will begin after a specified deferred period, usually of 26 weeks.

d. in the event of a claim the PCI contributions will be paid net of basic rate tax. e. in the event of a claim the PCI contributions will begin after a specified deferred period, usually of 26 weeks.

Isobel, who is in good health, was born on 17 July 1970. Under current legislation, the earliest date on which she will be able to take benefits from her defined contribution pension arrangement will be 17 July: a. 2037. b. 2025. c. 2027. d. 2035.

b. 2025.

A client requires advice about transferring a retirement annuity contract [RAC] into a personal pension plan [PPP] to take advantage of the flexible income options. Why might his adviser decide that the fund should remain within the retirement annuity contract? Select one or more: a. The PPP has higher charges than the RAC, but offers a wide range of funds that are in line with the client's attitude to risk, whereas the RAC is wholly invested in a with-profits fund. b. The RAC is wholly invested in a with-profits fund, which is currently subject to a significant market value reduction factor. c. A transfer to the PPP will need ongoing investment reviews and the client is happy with this. d. The RAC has a generous guaranteed annuity rate that will give the client a much higher income at his selected pension age. e. The PPP has higher charges than the RAC, but offers the drawdown pension option, whereas the only option under the RAC is a lifetime annuity.

b. The RAC is wholly invested in a with-profits fund, which is currently subject to a significant market value reduction factor. d. The RAC has a generous guaranteed annuity rate that will give the client a much higher income at his selected pension age.

Paula has recently left her job having been a member of the company's occupational defined contribution pension scheme for three years. What should Paula be aware of in respect of her early leaver options? Select one or more: a. She may be entitled to receive a short service refund. b. If she transfers to a non registered pension scheme, the transfer will be taxed as an unauthorised payment. c. She can choose to leave her benefits preserved within the scheme. d. If she chooses to transfer a disinvestment charge may apply. e. The transfer value cannot be less than the value of the employer and employee contributions made.

b. If she transfers to a non registered pension scheme, the transfer will be taxed as an unauthorised payment. c. She can choose to leave her benefits preserved within the scheme. d. If she chooses to transfer a disinvestment charge may apply.

A member leaving a defined contribution occupational pension scheme in the current tax year will only become entitled to a short service refund if they have completed less than how many days of qualifying service? a. 90. b. 30. c. 60. d. 120.

b. 30.

A client has an old individual pension contract. Why has his adviser concluded that he has a retirement annuity contract? Select one or more: a. It includes a guaranteed minimum pension. b. On death before retirement only contributions with interest are returned. c. It offers all of the pension flexibility options. d. It offers a guaranteed annuity rate at retirement. e. The client started the contract in 1991.

b. On death before retirement only contributions with interest are returned. d. It offers a guaranteed annuity rate at retirement.

Charge controls apply to the default arrangements of occupational defined contribution schemes being used as qualifying schemes. Where the charges are calculated as a percentage of members' funds, the maximum annual charge is: a. 1.25%. b. 0.5%. c. 1.0%. d. 0.75%.

d. 0.75%.

Xavier, who is 62, has been diagnosed with a terminal illness and has a life expectancy of less than one year. He has an uncrystallised personal pension fund of £150,000 and a flexi-access drawdown fund of £220,000. What gross amount, if any, will Xavier be able to take as a serious ill-health lump sum? a. £220,000. b. Nil. c. £150,000. d. £370,000.

c. £150,000.

When considering a statutory money purchase illustration: Select one or more: a. no allowance is made for mortality before retirement. b. the pension is shown in today's money terms. c. the pension illustrated must be the pension before any pension commencement lump sum is taken. d. the projection is based on an accumulation rate determined by the provider. e. expenses at retirement are ignored.

a. no allowance is made for mortality before retirement. b. the pension is shown in today's money terms. d. the projection is based on an accumulation rate determined by the provider.

What is the minimum number of members required for an Independent Governance Committee? a. Seven, at least two of whom must be independent. b. Seven, the majority of whom must be independent. c. Five, the majority of whom must be independent. d. Five, at least two of whom must be independent.

c. Five, the majority of whom must be independent.

What is NOT a benefit of a defined contribution scheme being set up under a master trust? a. Lower operating costs and greater simplicity and convenience than a single employer scheme. b. Trustees are appointed by each employer and so there will be trustee representation for each employer under the master trust. c. Members benefit from ongoing management and oversight of investments. d. Consolidated accounting and governance requirement.

b. Trustees are appointed by each employer and so there will be trustee representation for each employer under the master trust.

When considering the differences between a trust based pension scheme and a contract based pension scheme, an adviser should be aware that: Select one or more: a. employees typically see membership of a contract-based scheme as a less valuable benefit than membership of a trust-based scheme. b. an employer wishing to set up a defined contribution scheme for their workforce must use a trust based scheme. c. member contributions to a trust-based scheme can be made on a 'net pay' basis, but must be made using the relief at source method to a contract based scheme. d. a contract-based scheme is more costly for employers to run than a trust-based scheme. e. trust based and contract based defined contribution schemes are broadly the same in terms of the benefits they can offer.

a. employees typically see membership of a contract-based scheme as a less valuable benefit than membership of a trust-based scheme. c. member contributions to a trust-based scheme can be made on a 'net pay' basis, but must be made using the relief at source method to a contract based scheme. e. trust based and contract based defined contribution schemes are broadly the same in terms of the benefits they can offer.

When considering the charge controls that apply to certain defined contribution schemes, an adviser should be aware that: Select one or more: a. one member schemes are exempt. b. these regulations apply to all occupational defined contribution schemes. c. if charges are calculated solely as a simple percentage of members' funds, the limit per year is 0.75%. d. active member discounts are banned in qualifying schemes and this applies to all arrangements, not just their default arrangement. e. the cap on charges applies to transaction costs which are incurred as a result of buying or selling investments.

a. one member schemes are exempt. c. if charges are calculated solely as a simple percentage of members' funds, the limit per year is 0.75%. d. active member discounts are banned in qualifying schemes and this applies to all arrangements, not just their default arrangement.

What type of fund is the default investment choice for someone taking out a new stakeholder pension? a. Target date fund. b. Managed fund. c. Lifestyle fund. d. With-profits fund.

c. Lifestyle fund.

What type of fund is the default investment choice for someone taking out a new stakeholder pension? a. Target date fund. b. Managed fund. c. Lifestyle fund. d. With-profits fund.

c. Lifestyle fund.

What type of fund is the default investment choice for someone taking out a new stakeholder pension? a. Target date fund. b. Managed fund. c. Lifestyle fund. d. With-profits fund.

c. Lifestyle fund.

What is the maximum contribution, if any, a member can make to their own personal pension plan in any tax year? a. The amount of their relevant UK earnings. b. £40,000. c. There is no limit. d. £40,000 plus any available carry forward.

c. There is no limit.

Ji-hye left her company's occupational defined contribution scheme recently having been a member of the scheme for 15 months. What should she be aware of in respect of her early leaver options? Select one or more: a. She must be offered the option of preserved benefits. b. The value of her benefits will be the accrued value of her own personal contributions plus investment growth. c. She may be entitled to receive a refund of her own contributions. d. It is likely that any transfer value will only be accepted by a stakeholder pension due to the potentially small amount involved. e. She must be offered the option of a transfer value.

a. She must be offered the option of preserved benefits. d. It is likely that any transfer value will only be accepted by a stakeholder pension due to the potentially small amount involved. e. She must be offered the option of a transfer value.

How are a member's benefits valued for the purposes of trivial commutation? Select one or more: a. Where an income commenced after 5 April 2006 any associated pension commencement lump sum must be taken into account. b. Uncrystallised defined benefit rights are valued using a factor of 20, plus any pension commencement lump sum if this is paid in addition to the pension. c. Where an income started before 6 April 2006 any tax free cash that was taken is ignored. d. Where an income started before 6 April 2006, the amount of income on the nominated date is used to calculate the value for trivial commutation purposes. e. If a defined contribution fund is uncrystallised, the amount of the fund is the value for trivial commutation purposes. f. Income that was being received on 5 April 2006 is valued by a factor of 20

a. Where an income commenced after 5 April 2006 any associated pension commencement lump sum must be taken into account. b. Uncrystallised defined benefit rights are valued using a factor of 20, plus any pension commencement lump sum if this is paid in addition to the pension. c. Where an income started before 6 April 2006 any tax free cash that was taken is ignored. e. If a defined contribution fund is uncrystallised, the amount of the fund is the value for trivial commutation purposes.

Michael's wife, Sandra, died in May 2022 at the age of 76 and Michael is paid a small dependant's annuity which commenced in June 2022. If he wishes to commute this on the grounds of triviality: Select one or more: a. the maximum trivial commutation lump sum death benefit that can be paid is £30,000 per scheme. b. he cannot commute the benefits as Sandra died after reaching the age of 75. c. the commutation must extinguish his entitlement to benefits under this scheme. d. he must be at least 60 in order to commute this benefit. e. any trivial commutation lump sum death benefit must be paid out within two years of Sandra's death.

a. the maximum trivial commutation lump sum death benefit that can be paid is £30,000 per scheme. c. the commutation must extinguish his entitlement to benefits under this scheme.

HMRC provides specific circumstances where a scheme pension may be reduced or stopped. These include a reduction in the scheme pension due to: Select one or more: a. a court order. b. the cessation of a bridging pension at the member's State pension age. c. forfeiture of entitlement permitted by regulations. d. abatement. e. the scheme administrator paying a lifetime allowance charge in relation to the member. f. an earmarking order.

a. a court order. b. the cessation of a bridging pension at the member's State pension age. c. forfeiture of entitlement permitted by regulations. d. abatement.

What would be the potential advantages to a defined benefit scheme of paying a scheme pension from the scheme assets rather than securing an income with an annuity provider? Select one or more: a. The loss of longevity risk. b. Dependants may die sooner than expected. c. The administration is easier. d. No immediate outflow of capital. e. Investment risk is reduced.

b. Dependants may die sooner than expected. d. No immediate outflow of capital.

A conventional lifetime annuity offers flexible withdrawals. The minimum and maximum amount of income that may be drawn must be reviewed at least every: a. four years. b. two years. c. three years. d. five years.

d. five years.

Laura has deferred benefits in two defined benefit schemes that she would like to commute on the grounds of triviality. She has no other pension arrangements and her nominated date is 1 June 2022 when the benefits in these two schemes were valued at £12,000 and £15,000. What rules should be considered before the proposed trivial commutation can go ahead? Select one or more: a. Laura must have some available lifetime allowance. b. The commutation period will be a twelve month period that must start on 1 June 2022. c. These benefits can be commuted under the 'small pots' rules. d. Laura must have reached the age of 60. e. She can choose another nominated date and start the process again if she does not start to commute her benefits by 1 September 2022.

a. Laura must have some available lifetime allowance. e. She can choose another nominated date and start the process again if she does not start to commute her benefits by 1 September 2022.

On 1 June 2017, Les used his pension fund of £480,000 to purchase a single life, level lifetime annuity of £2,000 per month gross, payable monthly in advance, which included 50% annuity protection. Les died on 15 May 2022 at the age of 74. How much will his beneficiaries receive? a. £120,000. b. £66,000. c. £198,000. d. £360,000.

a. £120,000.

Trevor, aged 66, and his wife Louise, aged 63, each have personal pension funds valued at £200,000. They are both in excellent health and since they plan to use their funds to purchase lifetime annuities they should be aware that: Select one or more: a. they could both set up lifetime annuities with a guarantee period at the end of which a 50% spouse's pension would commence. b. the maximum guarantee period that Trevor can choose is nine years. c. if they both set up a single life annuity Trevor will receive a higher starting income than Louise. d. if they both include a 50% spouse's pension Louise's starting income will be reduced by less than Trevor's. e. only Trevor can include annuity protection.

a. they could both set up lifetime annuities with a guarantee period at the end of which a 50% spouse's pension would commence. c. if they both set up a single life annuity Trevor will receive a higher starting income than Louise. d. if they both include a 50% spouse's pension Louise's starting income will be reduced by less than Trevor's.

When taking benefits from an employer's defined benefit scheme: Select one or more: a. the pension income will be in the form of a lifetime annuity. b. any dependants' pensions payable on death before age 75 cannot be greater than the member's pension income. c. the scheme rules will determine the level of dependant's benefits included. d. the member can ask the trustees to pay the income via a drawdown pension. e. the income will escalate in payment each year by no less than the statutory minimum. f. the member could decide to phase in their scheme pension, if the scheme offers this facility.

c. the scheme rules will determine the level of dependant's benefits included. e. the income will escalate in payment each year by no less than the statutory minimum. f. the member could decide to phase in their scheme pension, if the scheme offers this facility.

Gordon, aged 63, dies with an uncrystallised personal pension. His nominated beneficiaries are his wife Sarah and their son Richard. What should Sarah and Richard be aware of in relation to any survivor's annuity that may be purchased using these funds? Select one or more: a. Any survivor's pension purchased by Sarah cannot include annuity protection. b. Sarah could use the personal pension to purchase a survivor's annuity with a five year guarantee period. c. The survivor's annuity income will be tax free. d. Any survivor's annuity purchased by Sarah cannot provide any further benefits for Richard when she dies. e. Both Sarah and Richard can use part of the fund to purchase a survivor's annuity. f. Sarah could receive a pension commencement lump sum prior to receiving a survivor's annuity.

a. Any survivor's pension purchased by Sarah cannot include annuity protection. d. Any survivor's annuity purchased by Sarah cannot provide any further benefits for Richard when she dies. e. Both Sarah and Richard can use part of the fund to purchase a survivor's annuity.

What death benefits may be included with a scheme pension from a defined benefit scheme? Select one or more: a. A spouse's scheme pension. b. A death in service lump sum death benefit. c. A guarantee period of no more than ten years. d. An annuity protection lump sum. e. A nominee's scheme pension.

a. A spouse's scheme pension. c. A guarantee period of no more than ten years.

Ross, who is 58 and in good health, has six paid up defined contribution pension arrangements all valued at less than £10,000. Four are non-occupational pension schemes and two are from unrelated occupational pension schemes. Which of these schemes, if any, can he choose to commute for small pots payments? a. None of them as he cannot take any small pots payments until he reaches the age of 60. b. Any three of them. c. Three of the non-occupational schemes and both of the occupational schemes. d. All of them.

c. Three of the non-occupational schemes and both of the occupational schemes.

What is the maximum guarantee period that a lifetime annuity set up in the current tax year can provide? a. Twenty years. b. Ten years. c. It is unlimited, but in practice it is determined by the terms of the annuity contract. d. Five years.

c. It is unlimited, but in practice it is determined by the terms of the annuity contract.

Gary died recently at the age of 68 having been in receipt of a scheme pension since he was 65. His scheme pension is guaranteed for the maximum permitted term and Gary's only surviving relative is his sister, Louise. What benefits, if any, will Louise be entitled to under the scheme and for how long? a. She will be entitled to Gary's full pension for two more years. b. She will be entitled to Gary's full pension for seven more years. c. She will be entitled to Gary's full pension for ten more years. d. She will not be entitled to any benefits under the scheme as she is not classed as a dependant.

b. She will be entitled to Gary's full pension for seven more years.

What are the two main factors that affect annuity rates offered by insurance companies? a. Longevity expectations and investment returns. b. Investment returns and the provider's expenses. c. Provider expenses and short-term bond yields. d. Longevity expectations and long-term bond yields.

d. Longevity expectations and long-term bond yields.

Chu hu's uncrystallised defined contribution pension arrangements consist of an executive pension plan [EPP] valued at £15,000, a stakeholder pension plan valued at £8,000 and a personal pension plan [PPP] valued at £18,000. Chu hu, who is 58, would like to take as many of these funds as possible as small pots payments and should be aware that: Select one or more: a. any small pots that she takes will not be tested against her lifetime allowance. b. the EPP can be split into two smaller funds of less than £10,000 each and she can take these as two separate small pots. c. she cannot take any small pots payments until she reaches the age of 60. d. the stakeholder pension fund can be commuted for a small pots payment. e. taking a small pots payment will trigger the money purchase annual allowance. f. the PPP can be split into two smaller funds of less than £10,000 each and she can take these as two separate small pots.

a. any small pots that she takes will not be tested against her lifetime allowance. d. the stakeholder pension fund can be commuted for a small pots payment. f. the PPP can be split into two smaller funds of less than £10,000 each and she can take these as two separate small pots.

George receives a small pension income from a previous employer's defined benefit scheme and has an uncrystallised executive pension plan [EPP] valued at £11,000. He wishes to commute both of these contracts on the grounds of triviality. George should be aware that: Select one or more: a. he will not be able to commute the EPP on the grounds of triviality. b. the value of both pensions combined must not exceed £30,000. c. he must have reached his 65th birthday. d. he must have available lifetime allowance. e. he will be entitled to receive 25% of the value of the defined benefit scheme pension tax free.

a. he will not be able to commute the EPP on the grounds of triviality. b. the value of both pensions combined must not exceed £30,000. d. he must have available lifetime allowance.

Daniel, who is 62, has two uncrystallised defined contribution pension arrangements. These are an executive pension plan [EPP] valued at £110,000 with a protected tax free cash entitlement of £45,000 and a personal pension plan [PPP] valued at £650,000. From which of these plans, if any, can he take an uncrystallised funds pension lump sum? a. Neither of them. b. The EPP only. c. The PPP only. d. Both of them.

c. The PPP only.

The review of a capped drawdown pension is due on 1 August this year. The re-calculation of the basis amount can be carried out within a 'window' that ends on 1 August. How long is this 'window'? a. 30 days. b. 40 days. c. 50 days. d. 60 days.

d. 60 days.

Warren, died recently aged 75, leaving a widow also aged 75. At the time of his death he had been drawing a retirement income using phased annuity purchase. The death benefits payable will consist of: Select one or more: a. a spouse's pension, if his widow selects one, on any of the annuities he has purchased. b. the remainder of any guarantee included in any of the annuities purchased. c. a tax free lump sum of any crystallised rights. d. a lump sum payment net of income tax at the recipient's marginal rate if annuity protection was selected by Warren when the annuities were purchased. e. a tax free lump sum of 25% of the uncrystallised rights.

b. the remainder of any guarantee included in any of the annuities purchased. d. a lump sum payment net of income tax at the recipient's marginal rate if annuity protection was selected by Warren when the annuities were purchased.

Under the Conduct of Business Sourcebook rules a suitability report on a drawdown pension contract must contain a number of specific risk factors, including: Select one or more: a. the investment returns may be less than those shown on the illustrations. b. there may be tax implications. c. inflation may erode the value of the fund in real terms. d. the levels of income provided may not be sustainable. e. the loss of guarantees following designation into drawdown.

a. the investment returns may be less than those shown on the illustrations. b. there may be tax implications. d. the levels of income provided may not be sustainable.

A client with a defined contribution pension arrangement must be given an open market options statement no more than two months: a. before they reach the age of 50. b. after they reach the age of 55. c. after they reach the age of 50. d. before they reach the age of 55.

c. after they reach the age of 50.

If Sally were to transfer her capped drawdown pension arrangement to a new provider: Select one or more: a. she must transfer the entire drawdown pension fund. b. the receiving scheme will adopt the scheme year of the ceding scheme. c. her maximum income under the arrangement will be reviewed upon transfer and a new reference period will begin. d. she can transfer this drawdown pension plan into an existing drawdown pension plan that she has with a different provider. e. she can tell the scheme administrator that on transfer the fund is to become a flexi-access drawdown fund.

a. she must transfer the entire drawdown pension fund. b. the receiving scheme will adopt the scheme year of the ceding scheme. e. she can tell the scheme administrator that on transfer the fund is to become a flexi-access drawdown fund.

One of the FCA's four drivers of vulnerability is capability; examples of the characteristics of vulnerability under this heading would include: Select one or more: a. mental health condition or disability. b. no or low access to help and support. c. caring responsibilities. d. over-indebtedness. e. learning difficulties. f. low knowledge or confidence in managing finances.

b. no or low access to help and support. e. learning difficulties. f. low knowledge or confidence in managing finances.

Rachel designated funds into a flexi-access drawdown pension in May 2022 and died, aged 73, in July 2022. Her nominated beneficiary is her grandson Ralph, aged 22. If Ralph designates the fund into a survivor's flexi-access drawdown fund in September 2022: Select one or more: a. the funds held within the survivor's flexi-access drawdown fund are outside of his estate for inheritance tax purposes. b. the funds held within the survivor's flexi-access drawdown fund can be passed on to a successor on his death. c. any withdrawals that he takes will be taxable as his pension income under PAYE. d. he is Rachel's successor. e. he can take as much or as little from the fund as income as he wishes.

a. the funds held within the survivor's flexi-access drawdown fund are outside of his estate for inheritance tax purposes. b. the funds held within the survivor's flexi-access drawdown fund can be passed on to a successor on his death. e. he can take as much or as little from the fund as income as he wishes.

When preparing a drawdown illustration for a client that illustrates critical yields, an adviser should be aware that: Select one or more: a. a type B critical yield shows the growth rate needed to provide and maintain a selected level of income. b. the critical yield takes into account both mortality drag and the additional costs of drawdown. c. type A illustrations must show annuity purchase at the client's selected pension age. d. type B illustrations must be accompanied by a type A illustration. e. standardised tables must be used for type A illustrations.

a. a type B critical yield shows the growth rate needed to provide and maintain a selected level of income. b. the critical yield takes into account both mortality drag and the additional costs of drawdown. d. type B illustrations must be accompanied by a type A illustration.

The Conduct of Business Sourcebook sets out rules that apply to open market options statements. These rules state that: Select one or more: a. the firm must remind the client about the open market options statement at least six weeks before the client's intended retirement date. b. the firm must recommend that the client seeks appropriate guidance or advice to understand their options at retirement. c. financial promotions for a pension decumulation product can be included when the client is reminded about the open market options statement. d. the firm must tell the client what sum of money will be available to exercise open market options at least eight weeks before the client's intended retirement date.

a. the firm must remind the client about the open market options statement at least six weeks before the client's intended retirement date. b. the firm must recommend that the client seeks appropriate guidance or advice to understand their options at retirement.

A short-term annuity must be payable by an insurance company and must be purchased using: a. funds held in a drawdown pension and be for a term not exceeding five years. b. uncrystallised funds and be for a term not exceeding five years. c. funds held in a drawdown pension and be for a term not exceeding three years. d. uncrystallised funds and be for a term not exceeding three years.

a. funds held in a drawdown pension and be for a term not exceeding five years.

Sergio has an uncrystallised personal pension plan valued at £400,000. In the current tax year he wishes to receive an income of £15,000 net of basic rate tax via phased annuity purchase. What is the minimum amount that must be crystallised if the annuity rate applicable is 6%? a. £54,151. b. £55,046. c. £52,448. d. £50,847.

c. £52,448.

What rules apply if a member under the age of 75 designates additional funds into an existing capped drawdown fund that places newly designated funds into the same arrangement? Select one or more: a. The basis amount will be immediately recalculated. b. The 60-day window can be used when recalculating the basis amount. c. A new pension year will start on the date that further funds are designated into the arrangement. d. If the basis amount increases, the higher maximum income will only apply from the start of the next pension year. e. The three year reference period will remain the same.

a. The basis amount will be immediately recalculated. e. The three year reference period will remain the same.

How must the cost of a pension annuity be expressed on a guaranteed annuity quote provided to a client? a. As a percentage of the purchase price, net of any adviser charges. b. As a single monetary value with any adviser charges shown as a separate figure. c. As a single monetary value, net of any adviser charges. d. As a percentage of the purchase price with any adviser charges shown as a separate figure.

c. As a single monetary value, net of any adviser charges.

What are the advantages of phasing retirement using a flexi-access drawdown pension rather than annuity purchase? Select one or more: a. Greater income flexibility. b. Lower costs. c. A lower level of risk. d. More tax efficient 'income'. e. Access to all of the pension commencement lump sum at outset. f. No need to select the format of survivors' benefits at outset.

a. Greater income flexibility. d. More tax efficient 'income'. f. No need to select the format of survivors' benefits at outset.

If Si Woo takes an income using phased annuity purchase, he should be aware that: Select one or more: a. the annuity element of each income payment will be taxable as Si Woo's pension income. b. the amount of fund to be crystallised is determined by the level of income required and the prevailing annuity rate. c. further income can be taken at any time. d. the income in the early years is predominantly made up of annuity payments. e. he cannot continue to phase annuity purchase after age 75.

a. the annuity element of each income payment will be taxable as Si Woo's pension income. b. the amount of fund to be crystallised is determined by the level of income required and the prevailing annuity rate. c. further income can be taken at any time.

Nina, aged 66, is about to transfer her capped drawdown arrangement, which has a pension year running from 1 May to 30 April and a reference period that started on 1 May 2021 and ends on 30 April 2024. The transfer takes place on 1 August 2022. Her new capped drawdown arrangement will have a pension year running from: a. 1 August to 31 July and a reference period that will end on 30 April 2024. b. 1 May to 30 April and a reference period that will end on 31 July 2025. c. 1 August to 31 July and a reference period that will end on 31 July 2025. d. 1 May to 30 April and a reference period that will end on 30 April 2024.

d. 1 May to 30 April and a reference period that will end on 30 April 2024.

William intends to phase his retirement and is trying to decide between phased annuity purchase or phased flexi-access drawdown. In deciding between these he should bear in mind that: Select one or more: a. phased flexi-access drawdown typically provides higher lump sum death benefits. b. the costs of phased annuity purchase tend to be slightly higher. c. the investment risk under phased annuity purchase is slightly lower. d. the money purchase annual allowance will be triggered if he uses phased flexi-access drawdown. e. there is greater flexibility of income levels under phased flexi-access drawdown.

a. phased flexi-access drawdown typically provides higher lump sum death benefits. c. the investment risk under phased annuity purchase is slightly lower. d. the money purchase annual allowance will be triggered if he uses phased flexi-access drawdown. e. there is greater flexibility of income levels under phased flexi-access drawdown.

On 1 October 2015 Rory deferred his full Basic State Pension [BSP] of £115.95 per week. He decides to draw it as an increased pension on 1 October 2022 when the BSP is £141.85 per week. What additional weekly pension [before tax] will he receive? a. £84.41. b. £103.27. c. £47.08. d. £57.59.

b. £103.27.

Celia's husband died recently having paid National Insurance Contributions for his entire working life. Why is Celia NOT entitled to the Bereavement Support Payment? a. She is aged 50 and does not have any children. b. She did not make a claim until six months after her husband's death. c. She is aged 50 and her husband died as a result of a job-related accident. d. She receives the Basic State Pension.

d. She receives the Basic State Pension.

Bill receives the full Basic State Pension plus a private pension of £4,500 p.a. What is the tax treatment of Bill's Basic State Pension? a. It will be paid gross with no tax due. b. It will be subject to income tax, but this will be deducted from Bill's private pension. c. It will be subject to income tax, which will be collected via Bill's self-assessment tax return. d. It will be paid net of basic rate income tax.

a. It will be paid gross with no tax due.

Bruce, who is 66, is employed on a salary of £16,000 p.a. and also receives his State Pension. What is the tax treatment of his State Pension? a. It will be paid net of basic rate tax. b. It is tax free. c. It will be paid gross, but is taxable; the tax owed will be payable via Bruce's self-assessment tax return. d. It will be paid gross, but is taxable; the tax owed will be collected through his employer's PAYE scheme.

d. It will be paid gross, but is taxable; the tax owed will be collected through his employer's PAYE scheme.

Hazel reached her State Pension Age in March 2016 having made 22 years of Class 1 National Insurance Contributions. As a result, in 2022/23, she can expect to receive a weekly Basic State Pension of: a. £89.16. b. £104.02. c. £85. d. £141.85.

b. £104.02. Retired before 6 April 2016 so old basic state pension consists of 30 years 22/30 * 141.85

Lauren reached her State Pension Age in August 2015. She deferred her State Pension and after exactly seven years she opts to take this as an additional income. By what percentage will her State Pension be increased? a. 40.6%. b. 99.9%. c. 72.8%. d. 48.4%.

c. 72.8%.

Nathan's starting amount for the new State Pension has been calculated as £195 per week. This is most likely to be because he is aged: a. 30, has always been employed as an administrator and has never been contracted out. b. 30, has always been employed as an administrator and prior to April 2016 was always contracted out. c. 60, has always been employed as a senior manager and prior to April 2016 was always contracted out. d. 60, has always been employed as a senior manager and has never been contracted out.

d. 60, has always been employed as a senior manager and has never been contracted out.

Individuals who paid Class 3A National Insurance Contributions will receive a higher level of: a. new State Pension, including a 50% spouse/civil partner's pension. b. Additional State Pension, with no provision for any spouse/civil partner's pension. c. Additional State Pension, including a 50% spouse/civil partner's pension. d. new State Pension, with no provision for any spouse/civil partner's pension.

c. Additional State Pension, including a 50% spouse/civil partner's pension.

Jayne aged 43 was widowed when her husband Brian died recently at the age of 48. She has a son aged 18 who recently started his first job and still lives with her. Jayne is eligible for the Bereavement Support Payment and will receive an initial payment of: a. £2,500 plus £100 per month for a maximum of 12 months. b. £3,500 plus £350 per month for a maximum of 18 months. c. £3,500 plus £350 per month for a maximum of 12 months. d. £2,500 plus £100 per month for a maximum of 18 months.

d. £2,500 plus £100 per month for a maximum of 18 months.

An individual who started to receive his State Pension in 2015 decides to defer it in the current tax year. What is the minimum period of deferral and by what rate will his State Pension increase? a. Nine weeks and it will increase by 5.8% for every year of deferral. b. Five weeks and it will increase by 5.8% for every year of deferral. c. Nine weeks and it will increase by 10.4% for every year of deferral. d. Five weeks and it will increase by 10.4% for every year of deferral.

d. Five weeks and it will increase by 10.4% for every year of deferral.

dependant may be able to claim a Category B State Pension if they have less than what percentage of the full Basic State Pension in their own right? a. 70%. b. 60%. c. 65%. d. 75%.

b. 60%.

In order to qualify for any entitlement to the new State Pension an individual must have a minimum of how many qualifying years? a. 20. b. 10. c. 15. d. 5.

b. 10.

Gail receives a Basic State Pension of £141.85 per week and has savings of £17,650. For the purposes of the State Pension Credit, she will be deemed to have a weekly income of: a. £177.85. b. £156.85. c. £141.85. d. £157.85.

d. £157.85. If you have more than £10,000, every £500 over £10,000 counts as £1 income a week. For example, if you have £11,000 in savings, this counts as £2 income a week.

An individual, who has no income in the current tax year, deferred their State Pension in 2014. If they now decide to take their deferred entitlement of £28,000 gross as a lump sum, what income tax, if any, will be payable on the lump sum? a. 20% on the entire amount. b. None on the first £17,570 and 20% on the balance. c. None. d. None on the first £12,570 and 20% on the balance.

c. None.

James receives a State pension of £80 per week plus a scheme pension of £50 per week and he has savings of £6,000. For the purposes of the State Pension Credit, what weekly income will he be deemed to have? a. £142. b. £50. c. £80. d. £130.

d. £130.

Francesco was employed between 1966 and 1998 and then he was self-employed from 1998 until he reached his State Pension Age in November 2015. If he has never been contracted out, which of the additional State Pensions will he receive? a. State Graduated Pension, State Earnings Related Pension and State Second Pension. b. State Graduated Pension and State Earnings Related Pension only. c. State Earnings Related Pension only. d. State Earnings Related Pension and State Second Pension only.

b. State Graduated Pension and State Earnings Related Pension only.

Delphine receives the Basic State Pension, and the State Second Pension [S2P]. Which of her State Pensions, if any, only increase each year in line with increases in the CPI? a. S2P only. b. Neither the Basic State Pension nor the S2P. c. Basic State Pension only. d. Both the Basic State Pension and the S2P.

a. S2P only.

Which investments, if held within a pension scheme, would be deemed 'taxable property'? Select one or more: a. Student hall of accommodation. b. Beach hut. c. Antique furniture. d. Caretaker's flat. e. Valuable painting.

b. Beach hut. c. Antique furniture. e. Valuable painting

If the average base rate of the six main clearing banks is 0.8%, the minimum interest rate for a loan from a small self-administered scheme back to the sponsoring employer would be: a. 1.8%. b. 2.8%. c. 3%. d. 2%.

d. 2%.

How are small self-administered schemes [SSASs] and contract based self-invested personal pensions [SIPPs] different? Select one or more: a. SIPPs benefit from more relaxed rules regarding the holding of residential property. b. Only SSASs are allowed to make loans to sponsoring employers. c. SSASs are allowed to borrow a higher percentage of their scheme assets than SIPPs. d. SIPPs are cheaper and less time consuming for an employer to run. e. Only SSASs are restricted on the level of shareholding held in any sponsoring employer.

b. Only SSASs are allowed to make loans to sponsoring employers. d. SIPPs are cheaper and less time consuming for an employer to run. e. Only SSASs are restricted on the level of shareholding held in any sponsoring employer.

A SSAS has assets of £1.4m and the trustees would like to invest in the shares of the members' sponsoring employers. In deciding how much to invest they should be aware that: Select one or more: a. the maximum that they can invest in any one sponsoring employer must be less than £70,000. b. if they invest in more than one sponsoring employer the maximum they can invest must be less than £350,000. c. they could, potentially, own 100% of the capital of a sponsoring employer. d. the percentage value that they can invest is re-tested every five years to ensure that the allowable limits are not exceeded. e. the percentage value that they can invest is calculated at the time the payment is made for the shares.

a. the maximum that they can invest in any one sponsoring employer must be less than £70,000. c. they could, potentially, own 100% of the capital of a sponsoring employer. e. the percentage value that they can invest is calculated at the time the payment is made for the shares.

Fraser, who is 35, has just received a bonus of £35,000 from his employer. Why should he invest this into a personal pension plan [PPP] rather than an ISA? Select one or more: a. There are no age restrictions on when he can take his benefits from the PPP. b. He can take the whole PPP fund as a tax free lump sum. c. Typically, the range of investments available within an ISA will be more restricted than those available within a PPP. d. The maximum amount he can pay into the ISA will be less than the maximum amount he can pay into his PPP. e. He will not receive any tax relief on the contribution made to the ISA.

c. Typically, the range of investments available within an ISA will be more restricted than those available within a PPP. d. The maximum amount he can pay into the ISA will be less than the maximum amount he can pay into his PPP. e. He will not receive any tax relief on the contribution made to the ISA.

If the scheme trustees of a small self-administered scheme wish to make a loan to the sponsoring employer, the: Select one or more: a. interest rate will be rounded up, if necessary, to the nearest multiple of 0.25%. b. loan must last for no longer than five years and can only be rolled over once. c. loan must be repaid in equal annual instalments of interest only. d. minimum interest rate is 2% over the average base rate of the six main clearing banks. e. loan must be secured as a first charge on assets with an equal or greater value.

a. interest rate will be rounded up, if necessary, to the nearest multiple of 0.25%. b. loan must last for no longer than five years and can only be rolled over once. e. loan must be secured as a first charge on assets with an equal or greater value.

A small self-administered scheme [SSAS] fund's net assets are made up of uncrystallised rights valued at £480,000 and crystallised funds in flexi-access drawdown valued at £210,000. How much can the SSAS lend back to the sponsoring employer? a. £105,000. b. £240,000. c. £690,000. d. £345,000.

d. £345,000. Up to 50% borrowing of assets

Why are fixed interest securities suitable as part of a pension investment? Select one or more: a. The value of fixed interest investments increases in line with increases in interest rates. b. Over the long term, fixed interest securities have tended to outperform equities. c. Fixed interest securities provide a safe haven in times of stock market uncertainty. d. When close to retirement they act as a hedge against movements in annuity rates. e. Gilts are totally secure investments as they are guaranteed by the Government.

c. Fixed interest securities provide a safe haven in times of stock market uncertainty. d. When close to retirement they act as a hedge against movements in annuity rates. e. Gilts are totally secure investments as they are guaranteed by the Government.

An adviser has determined that the 'screened' aspects of environmental, social and governance [ESG] investing appeal to a client. This is because the client: Select one or more: a. wants their investment to deliver a specific, positive, measurable social and/or environmental impact alongside a financial return. b. wishes to exclude companies directly involved in specific investments or areas of the market that they wish to avoid. c. wants to maximise their investment opportunity set but ensure financial material risks relating to E, S or G issues are taken into account in the investment decision-making process. d. only wants to invest in those companies at the forefront of sustainability practices and stakeholder management. e. has religious, ethical or personal values that they wish to be reflected in their investments.

b. wishes to exclude companies directly involved in specific investments or areas of the market that they wish to avoid. e. has religious, ethical or personal values that they wish to be reflected in their investments.

The investment portfolio of a medium to high risk investor is most likely to include: Select one or more: a. around 50% held in higher risk funds. b. only a small proportion of with-profits funds. c. a significant holding of individual shares. d. a significant proportion of asset backed investments. e. a significant amount invested outside of the UK.

b. only a small proportion of with-profits funds. d. a significant proportion of asset backed investments. e. a significant amount invested outside of the UK.

Basil, aged 62, has five small uncrystallised pension pots; three are held in personal pension plans and the other two are unrelated occupational schemes. He is considering taking these under the small pots rules and he should be aware that: Select one or more: a. he can only take three of his five funds as small pots payments. b. small pots payments do not trigger the money purchase annual allowance. c. each small pots payment will be wholly taxable as his pension income via PAYE. d. small pots payments will not be assessed against his lifetime allowance.

b. small pots payments do not trigger the money purchase annual allowance. d. small pots payments will not be assessed against his lifetime allowance.

What factors should be taken into account when considering a possible investment in residential property to provide income in retirement? Select one or more: a. Building up a portfolio of buy-to-let properties will result in a diversified portfolio. b. On a buy-to-let property, capital gains in excess of the annual exemption are taxable at the investor's highest income tax rate. c. The value of the properties will be outside of the investor's estate on death. d. There may be periods when no tenant can be found and hence there will be no income for these periods. e. Equity release is a possible way of obtaining capital or income from a property.

d. There may be periods when no tenant can be found and hence there will be no income for these periods. e. Equity release is a possible way of obtaining capital or income from a property.

Helen, aged 35, is about to start making contributions to a personal pension plan and plans to invest into a lifestyle fund. She should be aware that: Select one or more: a. lifestyling is best suited to taking an income in retirement by way of a drawdown pension. b. asset switching will start five to ten years before her chosen retirement age. c. her contributions will be invested wholly in fixed interest in the early years. d. the timing of the switches does not take account of market conditions. e. it is not possible to switch out of a lifestyle fund.

b. asset switching will start five to ten years before her chosen retirement age. d. the timing of the switches does not take account of market conditions.

Blanch, who is 23, was automatically enrolled into the National Employment Savings Trust in 2022. She is a member of a 2064 Retirement Date Fund. How many years will she spend in the Foundation Phase? a. Five. b. Seven. c. Twelve. d. Two.

d. Two. Foundation - Early twenties Growth - mid twenties and older Consolidation - 10 years before retirement

Gloria died recently and her personal pension fund was paid as a lump sum to her son James, who is aged 36 and not dependent upon Gloria. James was not given the option of receiving a continuing income because Gloria had: a. completed a nomination form in favour of James and has no other dependants. b. not completed a nomination form and her husband is still alive. c. completed a nomination form in favour of James but her husband is still alive. d. not completed a nomination form and has no other dependants.

b. not completed a nomination form and her husband is still alive.

Lily is invested in the National Employment Savings Trust 2051 Retirement Date Fund. In what year will her fund move into the consolidation phase? a. 2049. b. 2036. c. 2041. d. 2046.

c. 2041.

A loan from a small self-administered scheme must meet a number of conditions, EXCEPT that the loan must: a. have a maximum term of five years, although it can be rolled over for a further period of no more than five years. b. be secured, as a first charge, on assets that initially have a value that is at least equal to the loan, excluding any interest. c. carry a minimum interest rate of 1% above the average base rate of the six main clearing banks. d. be repaid by equal instalments of capital and interest.

b. be secured, as a first charge, on assets that initially have a value that is at least equal to the loan, excluding any interest.

What should an investor be aware of when making pension contributions into a traditional with-profits fund? Select one or more: a. Any annual bonus added to the fund cannot be taken away. b. Returns can be volatile as there is no smoothing. c. Bonuses are typically expressed as monetary amounts. d. With-profits funds traditionally invest in all asset classes. e. The value of the investor's units can go down as well as up. f. Any terminal bonus is guaranteed.

a. Any annual bonus added to the fund cannot be taken away. d. With-profits funds traditionally invest in all asset classes.

What should a director of a business be aware of when setting up a contract based self-invested personal pension plan [SIPP]? Select one or more: a. If the SIPP borrows funds, the loan must be for less than five years. b. It is not possible to lend money from the SIPP to his business. c. The SIPP can borrow funds to a maximum of 50% of the net scheme assets. d. No more than 5% of the SIPP's assets can be invested in his own company. e. He can invest in residential property. f. He can manage his own investments.

b. It is not possible to lend money from the SIPP to his business. c. The SIPP can borrow funds to a maximum of 50% of the net scheme assets. f. He can manage his own investments.

Sheila runs a successful unlisted limited company. She does not make any pension contributions as she would rather invest in her business. Shelia should be aware that: Select one or more: a. her investment for her retirement will lack diversification. b. Business Asset Disposal Relief means that capital gains within the business are likely to be taxed at 10%. c. 100% inheritance tax relief applies to a pension but not to a business. d. she may find it difficult to sell the business when she wants to retire. e. a pension will be considered a more illiquid investment compared to putting her money into her business.

a. her investment for her retirement will lack diversification. b. Business Asset Disposal Relief means that capital gains within the business are likely to be taxed at 10%. d. she may find it difficult to sell the business when she wants to retire.

Emilio has a self-invested personal pension [SIPP]. The gross value of the SIPP fund is £350,000 and it has £50,000 of existing borrowing that needs to be repaid from these funds. How much more is the SIPP able to borrow? a. £100,000. b. £150,000. c. £75,000. d. £125,000.

a. £100,000. ( Value - debt ) *50% max borrowing - existing debt

What are the benefits of having conventional gilts within a balanced pension portfolio? Select one or more: a. Their value rises as interest rates rise. b. They are secure as they are backed by the government. c. They provide security in times of stock market uncertainty. d. They will typically provide a return in excess of inflation. e. Both interest payments and the capital repayment at redemption are adjusted in line with inflation as measured by the CPI. f. They provide a known income stream.

b. They are secure as they are backed by the government. c. They provide security in times of stock market uncertainty. f. They provide a known income stream.

A 55 year old plans to retire at age 65 and he has been advised to switch his funds away from equities into fixed interest funds over the next ten years. What retirement income option is he most likely to be planning to use? a. Uncrystallised funds pension lump sum. b. Lifetime annuity. c. Flexi-access drawdown. d. Phased flexi-access drawdown.

b. Lifetime annuity.

Tom plans to purchase a conventional lifetime annuity. What factors should he take into account when deciding on the options to include within the annuity? Select one or more: a. A joint life annuity can only be set up for Tom's spouse, civil partner or dependant. b. A guarantee period of any length [subject to the provider's rules] can be included. c. The income can be set to increase each year. d. Decisions relating to the inclusion of a survivor's pension must be made at outset and cannot be changed. e. Any survivor's annuity can continue to be paid to further beneficiaries when the survivor dies.

b. A guarantee period of any length [subject to the provider's rules] can be included. Correct c. The income can be set to increase each year. d. Decisions relating to the inclusion of a survivor's pension must be made at outset and cannot be changed.

A loan from a small self-administered scheme to the sponsoring employer must: Select one or more: a. be secured, as a first charge, on assets that initially have a value at least equal to the loan plus the interest. b. not exceed 50% of the net value of the scheme's assets at the date the loan is granted. c. not last for longer than ten years, although it can be rolled over once. d. carry an interest rate that is no higher than 1% above the average base rate of the six main clearing banks. e. be repaid by equal instalments of capital and interest.

a. be secured, as a first charge, on assets that initially have a value at least equal to the loan plus the interest. b. not exceed 50% of the net value of the scheme's assets at the date the loan is granted. e. be repaid by equal instalments of capital and interest.

Sarah was widowed in May 2022. Her late husband had an ISA valued at £84,000 when he died which subsequently reduced to £82,000 by the time his estate was settled. What is the maximum amount that Sarah can invest into an ISA in the current tax year? a. £102,000. b. £104,000. c. £84,000. d. £82,000.

b. £104,000.

8. Gordon is employed and has a salary of £60,000. He has NOT yet made a pension contribution for the tax year 2022/2023 and has a total unused carry forward allowance of £70,000. What is the maximum tax-relievable personal contribution he can make in the tax year 2022/2023? A. £40,000 B. £60,000 C. £70,000 D. £110,000

B. £60,000

9. When Ivan died in May 2022 at the age of 73, his uncrystallised fund of £94,000 was paid three months later to his daughter whom he had nominated. If his unused lifetime allowance immediately prior to this payment was £42,000, how much tax will be levied on this payment? A. £23,400 B. £28,600 C. £42,300 D. £51,700

B. £28,600

12. A member of an occupational pension scheme dies and his dependants receive a lump-sum death- in-service benefit. Assuming there is no transitional protection, what key factor dictates whether any of this payment incurs a tax charge? A. The amount of the lump-sum payment. B. The size of the deceased’s estate. C. Whether a valid expression-of-wish had been made. D. Whether the deceased was an additional-rate taxpayer.

A. The amount of the lump-sum payment.

14. Paul died six months after starting a flexible drawdown pension and his widow, Suzi, took the death benefit as a lump sum. At the date of death, Paul was aged 78 and a higher-rate taxpayer, whilst Suzi, aged 72, was an additional-rate taxpayer. If the crystallised fund remaining was £75,000, what was the net amount received by Suzi? A. £33,750 B. £41,250 C. £45,000 D. £75,000

B. £41,250

15. John, aged 60, works on a part-time basis. He intends to take the benefits from his former occupational pension scheme which includes a pension commencement lump sum (PCLS) of £38,000. He currently pays £300 gross per month into a personal pension and once he receives his PCLS he plans to pay in a single contribution of £15,000 gross. He should be aware that in respect of recycling A. the entire PCLS is likely to be treated as an unauthorised payment. B. only the £15,000 single contribution is likely to be treated as an unauthorised payment. C. only £7,500 of the £15,000 single contribution is likely to be treated as an unauthorised payment. D. the single contribution will be allowed as it is less than 40% of the PCLS.

A. the entire PCLS is likely to be treated as an unauthorised payment.

16. How does a higher-rate taxpayer receive tax relief when making contributions to an occupational pension scheme under a net pay arrangement? A. At the basic tax rate as soon as the contribution is paid, with higher-rate relief paid via self-assessment. B. At the basic tax rate only as soon as the contribution is paid. C. At the employee’s marginal tax rate as soon as the contribution is paid. D. All tax relief is paid via self-assessment.

C. At the employee’s marginal tax rate as soon as the contribution is paid.

19. Mary and Jim are in the process of divorcing. In respect of their pension funds, offsetting would involve A. Jim becoming a deferred member of Mary’s pension fund. B. Jim transferring an amount into Mary’s pension fund. C. Mary making a lump-sum contribution into Jim’s pension fund. D. Mary retaining her own pension fund by transferring other assets to Jim.

D. Mary retaining her own pension fund by transferring other assets to Jim

20. An employer has asked the trustees of its qualifying occupational defined contribution pension scheme to introduce higher charges for deferred members of the scheme. The trustees should be aware that A. all member-nominated trustees must agree to such a change before it can be implemented. B. the trustees are not permitted to levy a higher charge on one class of member than another. C. the trustees have a duty to take into account the interests of all members. D. the trustees must put the interests of members who are nearer to retirement ahead of younger members.

C. the trustees have a duty to take into account the interests of all members.

22. Paul became a deferred member of a defined benefit occupational pension scheme in January 2014, after two years’ service. What minimum rate of revaluation, if any, will be applied to his deferred benefits? A. Any discretionary rate of revaluation agreed by the trustees may be applied. B. A minimum rate of 5% per annum or inflation, if higher, will be applied. C. A rate of 2.5% per annum or inflation, if lower, will be applied. D. There is no minimum revaluation rate.

C. A rate of 2.5% per annum or inflation, if lower, will be applied.

25. Within what maximum period, if any, should a newly-appointed trustee of a defined benefit occupational pension scheme reach the required level of trustee knowledge and understanding? A. Prior to the appointment. B. Six months. C. One year. D. There is no time limit.

B. Six months.

26. What retirement options, if any, exist for an employee, aged 48, who has just been declared unfit to work through ill health? A. Benefits may be paid in all circumstances subject to HM Revenue & Customs rules only. B. Benefits may be paid subject to the agreement of the scheme trustees acting in accordance with the scheme rules. C. Benefits may not be paid in any circumstances until age 55. D. Benefits may not be paid unless the member has a life expectancy of less than 12 months.

B. Benefits may be paid subject to the agreement of the scheme trustees acting in accordance with the scheme rules.

27. Under a public sector pension scheme, what is normally the maximum permissible pension commencement lump sum at retirement? A. 120/80ths final pensionable salary only. B. 40/60ths final pensionable salary only. C. The lesser of 120/80ths final pensionable salary or 25% of the capitalised value of the pre-commutation pension. D. The greater of 120/80ths final pensionable salary or 25% of the capitalised value of the pre-commutation pension.

A. 120/80ths final pensionable salary only.

35. John, aged 65 and a basic-rate taxpayer, decides to start drawing benefits from his personal pension under phased retirement using an annuity. If annuity rates are 5.3% and he crystallises funds worth £20,000, what is his maximum total net income in year 1? A. £848 B. £1,060 C. £5,636 D. £5,795

C. £5,636 25% tax free = £5000 £15000 used to purchase annuity x 5.3% =£795 x 0.8 as basic tax = £636 £5000 plus £636

36. Belinda, aged 78, has provided her financial adviser with her total pension arrangements as follows Capped Drawdown - Crystallised - £40,000 Personal Pension - Uncrystallised - £100,000 Group Money Purchase Scheme - Uncrystallised - £65,000 The financial adviser is considering commutation of Belinda’s pension arrangements on the grounds of serious ill health. Belinda should be made aware that A. commutation will be subject to a lifetime allowance test. B. the entire serious ill health lump sum will be taxed at her marginal rate. C. the entire serious ill health lump sum will be tax free. D. she will be able to commute the full £205,000 as a serious ill health lump sum.

B. the entire serious ill health lump sum will be taxed at her marginal rate. Taxable as she is over 75

37. Jack was a higher-rate taxpayer when he reached State Pension age in 2015. He deferred his Basic State Pension which he now intends to take as a lump sum of £16,000 gross. If his income from other sources is £3,000 below the higher-rate threshold, how much tax, if any, would be due as a result of Jack receiving the lump sum? A. Nil. B. £3,200 C. £5,800 D. £6,400

B. £3,200

38. Joan is approaching State Pension age and is looking at the possibility of claiming Pension Credit. Which State benefit is taken into account when assessing her eligibility for Pension Credit? A. Attendance Allowance. B. Carer’s Allowance. C. Disability Living Allowance. D. Personal Independence Payment.

B. Carer’s Allowance.

39. Sofia, aged 64, has been advised that her foundation amount will be higher than the full rate State Pension. She should be aware that at State Pension age she A. can commute the excess foundation amount as a lump-sum payment. B. must cease National Insurance contributions from the end of the current tax year. C. will receive the excess foundation amount as additional income. D. will receive the lower of the foundation amount and the full State Pension.

C. will receive the excess foundation amount as additional income.

MCQ 41. Peter, a financial adviser, is looking to set up either a small self-administered scheme (SSAS) or a self-invested personal pension scheme (SIPP) for two directors of a company. When comparing the two types of pension arrangements, he should be aware that the A. SIPP will be regulated by the Financial Conduct Authority. B. SIPP would normally be set up under contract. C. SSAS will issue Statutory Money Purchase Illustrations at least annually. D. SSAS would normally be set up under a master trust.

A. SIPP will be regulated by the Financial Conduct Authority. B. SIPP would normally be set up under contract.

MCQ 43. Jeff, aged 63, has just retired and has a capped drawdown pension. He also has a small occupational money purchase arrangement valued at £40,000, from which he wishes to take benefits immediately. With regards to his options, he should be aware that he will A. be able to take an uncrystallised funds pension lump sum. B. be able to use flexi-access drawdown. C. not be able to purchase a flexible annuity. D. not be able to use capped drawdown.

A. be able to take an uncrystallised funds pension lump sum. B. be able to use flexi-access drawdown.

44. Claudia, aged 58 and in good health, has a number of small personal pension arrangements and is interested in taking their benefits as a lump sum. In respect of the small pots rules, she should be aware that A. she must wait until she reaches age 60 before taking any small pots payment. B. a small pots payment is not a Benefit Crystallisation Event. C. the limit on each small pot payment is £10,000. D. there is no limit to the number of small pots payments that can be made.

B. a small pots payment is not a Benefit Crystallisation Event. C. the limit on each small pot payment is £10,000.

45. Benson, who has been in receipt of the State Pension since 2015 has asked his financial adviser whether he can defer taking benefits. The adviser should explain that A. he must defer for at least 5 weeks to receive any increase in income. B. he must defer for at least 9 weeks to receive any increase in income. C. his deferred pension will annually increase at the rate of 5.78% D. he will have the option to take a lump sum if he delays for at least 12 months.

A. he must defer for at least 5 weeks to receive any increase in income. D. he will have the option to take a lump sum if he delays for at least 12 months.

47. A 25-year-old is considering how much to pay into a personal pension plan in order to achieve a retirement income of half his salary. He should be aware that the A. Government Actuary’s Department recommends 8% of qualifying earnings as an adequate level of saving. B. higher the growth rate he assumes for his investments, the lower the level of contribution required to meet his target income. C. maximum prescribed growth rate in a key features illustration is 9% per annum. D. rate of return he receives on his savings is likely to be linked to how much risk he is prepared to take in his investment strategy.

B. higher the growth rate he assumes for his investments, the lower the level of contribution required to meet his target income. D. rate of return he receives on his savings is likely to be linked to how much risk he is prepared to take in his investment strategy.

As a new member of a private sector defined benefit scheme, the accrual of Mary’s pension commencement lump sum (PCLS) at retirement will be: A. determined by the scheme rules. B. 3/80 x salary x years of service. C. 3/80 x fund x years of service. D. 25% x fund value

A. determined by the scheme rules.

Denise had an uncrystallised defined contribution pension fund when she died in 2021. Denise had nominated her husband David and her daughter Molly to each receive half of her fund. If Molly was aged 30 when Denise died, she is considered to be a: A. dependant. B. nominee. C. successor. D. beneficiary

B. nominee.

A self-employed individual can obtain higher rate tax relief on personal pension contributions by: A. reducing their first payment on account by the amount of tax relief. B. reducing their second payment on account by the amount of tax relief. C. reducing their balancing payment by the amount of the tax relief. D. paying the pension contributions net of higher rate tax

C. reducing their balancing payment by the amount of the tax relief.

Cyril had pension benefits already in payment at ‘A ’ day. As he has further benefits to crystallise, the earlier pension will be valued by a factor of: A. 10:1. B. 20:1. C. 25:1. D. Zero

C. 25:1. Pre A-Day pension benefits are calculated using a v aluation factor of 25:1. (Note: This is higher than the valuation factor of 20:1 applied to pensions after A-Day as it is assumed the PCLS was taken

The minimum employer contribution for auto-enrolment purposes since 6 April 2019 is: A. 3% of total earnings. B. 3% of qualifying earnings. C. 8% of qualifying earnings. D. 8% of total earning

B. 3% of qualifying earnings.

What was the main purpose of the introduction of the Pension Schemes Act 2017? A. To provide greater regulation for the use of discretionary trusts with pensions B. To give TPR supervisory powers to authorise and de- authorise master trusts C. To provide employers with further guidance on implementing auto-enrolment D. To give the Pensions Ombudsman powers to investigate State pension

B. To give TPR supervisory powers to authorise and de- authorise master trusts

John has a defined contribution AVC whereas Tom’s AVC is on an “added years” basis. In which area, will Tom’s arrangement differ from John’s? A. Tax relief on contributions B. Ability to take some of the benefits as pension commencement lump sum C. Minimum pension age D.Inability to draw the benefit independent of the main scheme

D.Inability to draw the benefit independent of the main scheme

A pension in payment from a defined benefit scheme must escalate in line with CPI to a maximum of 2.5% for service: A. before 6 April 1978. B. after 5 April 2005. C. before 5 April 1997. D. after 5 April 199

B. after 5 April 2005.

Sarah is retiring after 20 years’ service in a 1/60 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 3/80 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: A. £12,000 p.a. B. £13,000 p.a. C. £15,000 p.a. D. £16,000 p.a

B. £13,000 p.a. Sarah’s entitlements are as follows: Maximum pension entitlement = 20 x 1/60 x £48,000 = £16,000 or Maximum PCLS entitlement = 20 x 3/80 x £48,000 = £3 6,000 (plus a reduced pension). As the commutation factor is 12:1, the maximum pens ion is reduced by £1 for each £12 of PCLS taken. So, if Sarah takes the maximum PCLS, her pension is reduced by (£36,000/12 =£3,000). Therefore, her reduced pension is £16,000 - £3,000 = £13,000.

Alan’s 61 birthday is tomorrow. He has 25 years’ service in a 1/60th defined benefit pension scheme. His pensionable salary is £40,000. The scheme’s normal retirement age is 65. If Alan retires tomorrow and the scheme reduces his pension by 0.5% per month for early retirement, his pension will be: A. £12,666.67. B. £14,000.00. C. £16,333.34. D. £16,666.67

A. £12,666.67. If tomorrow was Alan’s 65 birthday (normal retirement age), then his pension would have been: 25 x 1/60 x £40,000 = £16,666.67 As he is retiring 48 months early, his pension is reduced by 0.5% x 48 = 24%. Therefore, Alan will only receive 76% of his full pension entitlement, and his annual scheme pension will be £16,666.67 x 76% =£12,666.6

When the administrators of a defined benefit scheme calculate an early leaver transfer value, the process of converting the lump sum value of pension benefits at retirement to a capital value in today’s terms is known as: A. discounting. B. revaluing. C. capitalising. D. securitising

A. discounting.

Which of the following is a correct statement regarding ‘in-specie’ contributions? A. They are pension contributions in the form of an as set such as shares. B.The rules only apply to pension contributions of over £10,000. C. The scheme administrator recovers 40% tax from HM Revenue & Customs (HMRC). D. They can only be made to unapproved scheme

A. They are pension contributions in the form of an as set such as shares.

Which of the following are correct statements regarding the regulation of Stakeholder pensions? A. The scheme must be registered with the Pensions Ombudsman. B. The Pensions Regulator is responsible for registration compliance. C. The ABI regulates the marketing of schemes. D. The Pensions Regulator supervises the fund manager

B. The Pensions Regulator is responsible for registration compliance.

Manesh is a member of a defined contribution pension scheme but does NOT receive an annual Statutory Money Purchase Illustration. This is because Manesh has a: A. personal pension. B. Stakeholder Pension. C. Self-Invested Personal Pension. D. Retirement Annuity Contract

D. Retirement Annuity Contract

If Maria wishes to achieve a higher level of new State Pension by increasing the number of ‘qualifying years’, she should consider paying which of the following National Insurance contributions? A. Class 3A B. Class 3 C. Class 2 D. Class

B. Class 3

Madeline has made a successful claim for Bereavement Support Payment at the higher rate. This is because she: A. has earnings under the primary contribution threshold. B. is claiming child benefit for her two children. C. has paid National Insurance contributions at the higher rate for 25 weeks. D. is over State pension age and has been UK resident for at least 12 months

B. is claiming child benefit for her two children.

Barney designated funds to capped drawdown in April 2014. With regards to capped drawdown rules, Barney should be aware that: Tick all that apply. A. his benefits can stay in capped drawdown for as long as he wishes. B. the maximum permitted income review frequency was re-set from 6 April 2015. C. the maximum income is 150% of the basis amount. D. he cannot transfer his existing plan into a new capped drawdown plan with another provider. E. he can designate additional funds into his existing capped drawdown plan

A. his benefits can stay in capped drawdown for as long as he wishes. C. the maximum income is 150% of the basis amount. E. he can designate additional funds into his existing capped drawdown plan

Norman started flexible drawdown in June 2013. As a result of the rule changes on 6 April 2015, he should be aware that: Tick all that apply. A. his arrangement was converted to flexi-access drawdown. B. the money purchase annual allowance (MPAA) was triggered from the date of his first withdrawal after converting to flexi-access drawdown. C. his position with regards to being able to make defined contribution pension contributions without incurring an annual allowance charge improved. D. the automatic conversion into flexi-access drawdown was a benefit crystallisation event

A. his arrangement was converted to flexi-access drawdown. C. his position with regards to being able to make defined contribution pension contributions without incurring an annual allowance charge improved.

Flo entered into a capped drawdown contract in Dece mber 2014. Her financial adviser should be aware that the GAD rates used for calculating the basis amount and the maximum income for Flo are based on gilt yields and a notional annuity which is: Tick all that apply. A. level in payment. B. payable monthly in advance. C. guaranteed for 10 years. D. single life

A. level in payment. D. single life

A financial adviser is considering the inclusion of fixed interest securities in a client’s retirement portfolio. She should be aware that: Tick all that apply. A. the fixed redemption value is known as the par value. B. the coupon represents the fixed rate of interest given. C. they all have a set redemption date. D. they represent loans to various institution

A. the fixed redemption value is known as the par value. B. the coupon represents the fixed rate of interest given. D. they represent loans to various institution

Under HM Revenue & Customs (HMRC) rules pension adv ice provided to employees by their employers is NOT treated as a benefit in kind provided the cost is no more than how much per employee per tax year? A. £50 B. £75 C. £150 D. £500

D. £500

The major advantage of the net pay method in providing pension tax relief to a higher paid individual is: A. contributions are taken from the bottom line of an individual’s net pay. B. contributions qualify for additional rate tax relief, regardless of an individual’s tax rate. C. there will be no liability to any annual allowance charge. D. contributions are taken from gross pay giving immediate relief at the prevailing rate

D. contributions are taken from gross pay giving immediate relief at the prevailing rate

In 2021/22, Paul receives a salary of £206,000. He has savings interest of £1,000 and dividend income of £40,000. Paul is a member of his employer’s occupational defined contribution pension scheme and contributions are paid via the net pay arrangement. In 2021/22 Paul pays £20,000 gross to the scheme and his employer pays £10,000. What is Paul’s tapered annual allowance? A. £31,500 B. £30,000 C. £28,000 D. £25,000

A. £31,500

Alan, a basic rate taxpayer, is exercising his right to take all his benefits from his defined benefit pension scheme in the form of a lump sum under the Trivial Commutation rules. If his CETV is £12,000, what amount will Alan receive? A. £9,600 B. £10,200 C. £7,200 D. £12,000

B. £10,200 25% tax free = £3000 £9000 x 0.8 (basic tax payer ) = £7200 7200 + 3000 = 10200

Joyce registered for Primary protection with a fund at A-day valued at £2m. Assuming a lifetime allowance for Joyce of £2.4m at the point when Joyce crystallises her fund, what can her fund build to before any lifetime allowance charge is levied? A. £2.0m B. £2.4m C. £2.7m D. £3.2m

D. £3.2m As Joyce registered her pension benefits for primary protection, she is entitled to an enhanced personal lifetime allowance. This is calculated by applying her primary protection factor to the lifetime allowance. Joyce’s primary protection factor is: (Pension bene fits on 6 April 2006= £2m - £1.5m)/£1.5m = 0.33 (33.33%). Therefore, Joyce’s lifetime allowance when she crystallises her funds = £2,400,000 x 133.33% = £3,200,000 (rounded up

If HM Revenue & Customs (HMRC) withdraws registration of a registered pension scheme, then a de-registration income tax charge will be levied. This amounts to: A. 40% of the prohibited assets which caused the scheme to be de-registered. B. 15% of the fund value held immediately before de-re gistration. C. 25% of the fund value held immediately before de-registration. D. 40% of the total value of funds held immediately be fore de-registration

D. 40% of the total value of funds held immediately be fore de-registration

Martin’s registered pension fund is being transferred to a QROPS. The transfer is in excess of his lifetime allowance. What lifetime allowance charge will apply to the excess before the funds are transferred? A. 55% B. 45% C. 40% D. 25%

D. 25%

To qualify as a Qualifying recognised overseas pens ion scheme (QROPS) the scheme must be established in a country which: A. agrees to implement the same pension regulations that apply in the UK. B. has a double taxation agreement in place with the UK. C. agrees not to impose any pension flexibility. D. is outside the UK and notifies HM Revenue & Customs (HMRC) annually that the scheme meets the required conditions to be a QROP

B. has a double taxation agreement in place with the UK.

Evelyn wishes to make a complaint against her former employer in relation to incorrect administration of the occupational pension scheme. Who should she complain to? A. The Pensions Advisory Service B. The Pensions Ombudsman C. The Pensions Regulator D. The Financial Ombudsman Service

A. The Pensions Advisory Service

Section 143 Valuation is an actuarial assessment carried out in connection with the: A. Pension Protection Fund determining whether there are insufficient assets in an insolvent employer’s pension scheme. B. payment of a cash equivalent transfer value when a member leaves an occupational scheme. C. triennial fund valuation on a defined benefit scheme. D. transfer calculation on wind up of a final salary scheme with the assets moving over to a defined contribution vehicle

A. Pension Protection Fund determining whether there are insufficient assets in an insolvent employer’s pension scheme.

Why might an employer decide to provide death in service benefits through a separate insured scheme as opposed to through a defined benefit scheme? A. To maintain death in service benefits without draining the fund B. To treat the death in service benefits as an allowable expense C. If the employees were all below 45 D. As the defined benefit scheme is fairly large

A. To maintain death in service benefits without draining the fund

The International Accounting Standards 19 (IAS 19) laid down a requirement for defined benefit schemes that any scheme surplus or deficit must be shown on the company: A. balance sheet and the present value of past service liabilities should reflect equity yields rather than high quality bond yields. B. profit and loss account and the present value of past service liabilities should reflect high quality bond yields rather than equity yields. C. balance sheet and the present value of past service liabilities should reflect high quality bond yields, rather than equity yields. D. profit and loss account and the present value of past service liabilities should reflect equity yields, rather than high quality bond yields

C. balance sheet and the present value of past service liabilities should reflect high quality bond yields, rather than equity yields.

An employer has registered the use of National Employment Savings Trust (NEST) for their workplace pension needs. It is the responsibility of the employer to automatically enrol what category of workers? a. Entitled Workers. b. Eligible Workers. c. Eligible Jobholders. d. Eligible Jobholders and Non-Eligible jobholders.

c. Eligible Jobholders.

Micki is 70 years old and is in receipt of his State Pension. He has taken a new role in anticipation of his upcoming retirement. He earns £20,000 per annum. In regards to his employer’s obligation for autoenrollment, it is correct to define Micki as a … a. entitled worker. b. non entitled worker. c. non-eligible jobholder d. eligible jobholder

c. non-eligible jobholder

Jude is the director of his limited company and withdraws a salary of £220,000 and dividends of £2,000. Through the company, Jude invests £25,000 into his personal pension plan. As a result, what is Jude's tapered annual allowance, if any? a. There is no tapering as Jude's adjusted income is below £200,000. b. £37,500 c. £36,500 d. £40,000

C. £36,500 Threshold income £200,000+ Total taxable income and we can minus off any personal pension contributions but we ignore any employer contributions. Jude is investing through the company, employer contributions. So, Jude's threshold income is £220,000 + dividends £2,000 = £222,000 This is in excess of £200,000 and subject to the next test Adjusted income £240,000+ Reduced by £1 for every £2 over adjusted income. Again,total taxable income, but we include employer contributions. (and we would ignore personal relief @ source). £220,000 + £2,000 + employer £25,000 = £247,000 £7,000 over the adjusted income of £240,000 AA is reduced by £1 for every £2 £7,000 / 2 = £3,500 we need to minus this off the AA £40,000 - £3,500 = tapered AA of £36,500

Yasmin has a Self-Invested Personal Pension (SIPP) scheme. Her scheme is valued at £1,300,000, including commercial property, and she has successfully applied for Fixed Protection 2014. She should be aware that a. she can continue to contribute to the scheme but the value in excess of £1,500,000 will not be protected. b. she can continue to make contributions to the scheme until her fund value reaches £1,500,000. c. she cannot make any further pension contributions without losing the protection. d. her lifetime allowance will be £1,800,000 revalued in line with the Consumer Price Index.

c. she cannot make any further pension contributions without losing the protection. \Explanation. Think of fixed protection as being fixed and rigid. It protects benefits up to a maximum of £1,500,000 (because at that time, the LTA was reduced from £1,500,000 to £1,250,000) but no further contributions / accrual can happen after 6th April 2014

Tina is in receipt of her scheme pension which she took back in August 2005. The payment has been level at £12,000 per annum. Tina would now like to retire and access her workplace pension scheme to replace her earnings. How will the scheme pension be valued against the lifetime allowance? Capital value of £216,000. b. Capital value of £240,000. c. Capital value of £300,000. d. It will not apply as it was prior to the 6th April 2006.

c. Capital value of £300,000. Explanation. If Tina was not going to take any further benefits after A-Day (6th April 2006) then there would be no need to test the scheme pension against the LTA. However, if Tina withdraws further benefits after ADay, then we need to drag this pension into the new tax regime. Scheme pension = 25 x annual pension amount at the date of the first post A-day BCE. We know the pension is still £12,000 so £12,000 x 25 = £300,000

Marcus is a member of his capped drawdown arrangement via his Self-Invested Personal Pension (SIPP) since May 2014. He was withdrawing a regular income from his SIPP but this ceased in 2016. He is now looking to utilise his annual allowance for the tax year 2022/23. Ignoring any previous allowances available to him from previous tax-years, what is the maximum gross contribution, without exceeding the Annual Allowance? a. £2,880. b. £3,200. c. £32,000. d. £40,000

d. £40,000 Explanation. Although Marcus was withdrawing an income, he is not subject to the MPAA because it is a Capped Drawdown plan. Under Capped Drawdown, members can retain their full Annual Allowance. * The question states that we should ignore anything previously – this includes any relevant Carry Forward. * The question also specifies gross payment, £40,000. Always look out for net or gross.

Rodney died in June 2019, age 68. The trustees were notified 1 month after his death. In September 2022, the lump sum death benefit from pension was payable to a discretionary trust for the benefit of his two sons. His sons should be aware, however, that… a. the death benefit will be classified as an unauthorised payment. b. the death benefit will be subject to 45% tax. c. the death benefit will be subject to 55% tax. d. the death benefit will be tax-free, assuming that there was enough Lifetime Allowance remaining.

b. the death benefit will be subject to 45% tax. Explanation. The two-year window starts from the date the scheme administrator/trustee is notified of the death. If the lump sum is paid outside of the two-year window, the payment is taxable. Where the payment is made to a trust or personal representative, it is subject to the special lump-sum death benefit charge of 45%. There is also no test against the member’s remaining lifetime allowance!

Alan, a basic rate taxpayer, has elected for a trivial commutation of £5,000. What is the total tax liability? a. Nil b. £750 c. £1,000 d. £2,000

b. £750 Explanation. 25% of the lump sum is payable tax-free. The rest is payable at the member's marginal rate of income tax. This means that if they currently pay tax at the 20% basic rate tax then 75% of the lump sum will be subject to this tax, unless the lump sum payment pushes them into a higher tax bracket (which you don't have enough information to know this) so... £5,000 x 75% x 20% (basic rate) = £750

When can a Cash Equivalent Transfer Value (CETV) fund be reduced for a funded public sector scheme? a. When the transfer affects other members within the scheme. b. Spouse is more than 10 years younger than the member. c. Under no circumstances. d. When they are more than one year from their Normal Retirement age.

a. When the transfer affects other members within the scheme.

Lenon, a higher rate taxpayer, has been an active member of his employer's defined benefit scheme for 19 months. However, he has recently decided to take a new role and will leave his current employment. Over the period of employment, Lenon's employer has contributed £10,000 into the scheme and Lenon £13,500 gross. How much will Lenon receive from the return of contributions, if applicable? a. Nil – Lenon is not entitled to a short service refund as his service has exceeded 18 months. b. £8,100 c. £10,800 d. £18,800

c. £10,800 Explanation. If a member has less than 2 years of service within the scheme, it is possible to return the personal pension contributions that the member has PERSONALLY paid in. Members are not entitled to a refund of employer contributions! This is known as a short service refund, which is not obligatory for the scheme to offer this. * 20% tax is paid on the first £20,000, * 50% on the balance in excess of £20,000 Lenon has contributed £13,500, and so has to pay tax of 20% and will receive £10,800. It's the scheme administrator who deducts this tax, and the member will receive the net payment.

Maya recently passed away at the age of 85. At the time of her death, she was a higher rate tax payer and had relevant UK earnings of £60,000. Her pension benefits were within her remaining Lifetime Allowance and she had nominated her husband, Grant, to receive them. Grant is 74 years old and has a total taxable income of £52,000. If Grant requests a lump sum of £48,000 from the pension fund administrators, how much would he receive net of any taxation? a. £21,600 b. £28,000 c. £31,200 d. £48,000

b. £28,000 Explanation. A lot of useless information is included in here. We care about the age of death which is 85. This means that the income will be taxable at the recipient’s marginal rate. Now we care about the recipient’s marginal rate. Grant has total taxable income of £52,000 so we can assume that he's a higher rate tax payer which pays 40% tax. £48,000 x 40% = £19,200 £48,000 - £19,200 = £28,800 (or £48,000 x 60% = £28,800)

Sandra had phased her retirement and would now like to access her flexi-access drawdown pension funds. Sandra should be aware that when withdrawing benefits from flexi-access drawdown, they will be paid … a. 25% will be tax-free, with the remainder taxable at her marginal rate. b. as earned income via Pay As You Earn (PAYE). c. gross but taxable via self-assessment. d. tax-free.

b. as earned income via Pay As You Earn (PAYE).

Stan, aged 76, drawn his retirement income via flexi-access drawdown. Upon his death, his wife, Monica, received £400,000. With the death benefits, she decided to draw a lump sum of £80,000 with the balance placed in flexi-access drawdown. Monica’s taxable income at the time of the withdrawal was £57,000. Monica later passed away at age 73 and left the benefits to her son. Her son earns £160,000 and withdrew £150,000 from the pension fund. Calculate the total tax charge applicable, if any. a. Nil b. £32,000 c. £67,500 d. £99,500

b. £32,000 Doesn’t mention anything about LTA can ignore that! Also don’t worry about PCLS on death. PCLS is a retirement benefit and the initial £400,000 is a death benefit, as death occurred after the age of 75, Monica must pay tax at her marginal rate. We know Monica is a higher rate taxpayer because her taxable income if £57,000. She withdraws a lump sum, taxable at her marginal rate, of £80,000 x 40% = £32,000 Now Monica passes away before the age of 75. The rules will reset and the total fund will be completely tax-free. That means her sons withdrawal will not be taxable income and there’s no further tax liability

Evelyn reached her State Pension Age in May 2016 with 15 qualifying years. Her spouse reached his State Pension age in January 2016 with 30 qualifying years. What amount of Category B pension will Evelyn be entitled to in the tax year 2022/23? a. Nil. b. £40.23 c. £80.45 d. £134.25

a. Nil. Explanation. A dependant who has reached their State Pension Age with less than 18 qualifying years (so less than 60% of the state pension entitlement) can claim for an additional income, Category B pension. This is based on their spouse's State Pension entitlement. So, if they had a full State Pension record, and the spouse had less than 18 years, it's possible for them to top up their basic state pension and claim a maximum of £82.45. It's £82.45for 2021/22 and you're not given this in your exam! HOWEVER - this the old rules, if you have reached State Pension age before 6th April 2016. You'll see that Evelyn and her husband is after, and so this is not applicable.

Lara is the director of a limited company and has sought advice from a financial adviser. She would like to enquire whether a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) would be suitable for her. She should be aware that... a. a contract based SIPP does not permit loans to an employer. b. a SIPP set up under an individual trust does not permit loans to an employer. c. loans from an occupational scheme to the sponsoring employer must not exceed 50% of the net value of the scheme assets. d. both SIPPs and SSASs can borrow funds for investment purposes.

a. a contract based SIPP does not permit loans to an employer. c. loans from an occupational scheme to the sponsoring employer must not exceed 50% of the net value of the scheme assets. d. both SIPPs and SSASs can borrow funds for investment purposes.

Aman has set up a self-directed pension scheme. He should be aware that the scheme will not receive tax advantages for investing in which of the following types of assets... a. residential property. b. commercial property. c. art and antiques. d. motor vehicles. e. unlisted companies.

a. residential property. c. art and antiques. d. motor vehicles.

Martin has preserved the value of his flexi-access drawdown plan as he has been told that the plan is tax-efficient with regards to Inheritance Tax. He is due to meet his adviser to further discuss his estate planning needs. Martin should be aware that... a. the value held within a pension plan will always be free from inheritance tax. b. the death benefit payment must be made within the relevant two-year period. c. the death benefit payment must be made within the relevant three-year period. d. the trustees of the pension scheme must have discretion over who to pay death benefits to. e. the trustees must comply with the plan holder's direction.

b. the death benefit payment must be made within the relevant two-year period. d. the trustees of the pension scheme must have discretion over who to pay death benefits to.

Gemma is the director of a limited company as well as being employed. She inherited a large equity investment portfolio as well as cash. She would like to invest within her pension scheme. Which of the following sources of income are classed as relevant UK earnings for this purpose? a. The salary withdrawn from her limited company. b. Any other income from a trade or profession. c. The income received from employment, excluding overtime and bonuses. d. Dividends derived from the equity investment portfolio.

a. The salary withdrawn from her limited company. b. Any other income from a trade or profession.

A financial adviser has recommended a new drawdown arrangement for their client. When writing the suitability report, what risk warnings MUST be included to meet the Financial Conduct Authority Conduct of Business requirements? a. The capital value of the fund may be eroded. b. Annuity or scheme pension rates may be at a worse level in the future. c. Direction to Pension Wise for further information. d. Annual reviews are recommended to ensure sustainability. e. There may be tax implications.

a. The capital value of the fund may be eroded. b. Annuity or scheme pension rates may be at a worse level in the future. e. There may be tax implications.

David is self-employed and took out a stakeholder pension. As he is approaching retirement, he is wondering what options are available to him if he wished to purchase a lifetime annuity. Which of the following options are permittable? a. An annuity protection capital lump sum. b. A guarantee period of a maximum of ten years. c. A survivor pension, payable only to a dependant as defined by HMRC. d. The income is payable annually in advance. e. David can decide how much Pension Commencement Lump Sum he can take, up to a maximum of 25% of the fund value.

a. An annuity protection capital lump sum. d. The income is payable annually in advance. e. David can decide how much Pension Commencement Lump Sum he can take, up to a maximum of 25% of the fund value.

Cho has both a personal pension plan and a stakeholder pension plan which were both set up in 2017. Cho would like to consolidate her pension plans and would like advice on which one to transfer. Her financial adviser should make her aware that... a. a stakeholder pension scheme must accept contributions at any frequency. b. the minimum permitted contribution to the stakeholder pension scheme is £50 gross. c. the maximum annual charge for the stakeholder pension depends upon when the member joined the stakeholder scheme. d. the maximum annual charge for the personal pension must be no more than 1.50% for the first 10 years, reduced to a maximum of 1.00% per annum. e. Cho's investment choices is likely to be limited within the personal pension plan.

a. a stakeholder pension scheme must accept contributions at any frequency. c. the maximum annual charge for the stakeholder pension depends upon when the member joined the stakeholder scheme.

Ali is age 55 and has fully utilised his pension annual allowance. He is looking at alternative investments to diversify his retirement assets. Which of the following statements are true? a. Funds held within an Individual Savings Account will not form part of Ali's estate for Inheritance Tax purposes. b. Investments within a Venture Capital Trust may qualify for 30% Income Tax relief if held for three years. c. Investments within a Venture Capital Trust are exempt from Capital Gains Tax. d. Investments within an Enterprise Investment Scheme may qualify for 30% Income Tax relief if held for three years. e. For an investment bond, Ali could withdraw 5% of the initial investment as a tax-deferred withdrawal.

In 2022/23, a client has reached their State Pension age but is still in full time employment, earning in excess of £100,000. They would like to minimise their tax-liability by deferring their State Pension. By deferring their State Pension, it will mean that... a. their State Pension will increase by 1% for every five weeks. b. they need to defer for at least nine weeks to receive any increase in the income they receive. c. there is no option to take the deferred amount as a lump sum. d. it is possible for the client's surviving spouse to inherit the deferred State Pension.

b. they need to defer for at least nine weeks to receive any increase in the income they receive. c. there is no option to take the deferred amount as a lump sum.

Which of the following sources of income are classed as relevant UK earnings for pension purposes? a. Employment income. b. Dividend income. c. Interest from a bank account. d. Earnings from an overseas Crown employment, subject to UK tax. e. Income arising from carrying on or the exercise of a trade, profession or vocation. f. Rental income from a buy-to-let property.

a. Employment income. d. Earnings from an overseas Crown employment, subject to UK tax. e. Income arising from carrying on or the exercise of a trade, profession or vocation.

In the 2022/23 tax year, the monetary trigger used in determining whether a PCLS has been recycled is: a. £7,500 b. £12,500 c. £15,000 d. £18,000

The answer is a. £7,500.

In which of the following scenarios will a PCLS be treated as an unauthorised payment? a. Carrie receives a PCLS of £6,000 from her personal pension plan and two months later she decides to recycle £2,000 into a new personal pension plan. b. George receives a PCLS of £50,000 from his employer's defined benefit scheme. He is currently contributing £200 per month into a personal pension plan and six months later he recycles £30,000 of the PCLS into the personal pension plan. c. Hannah receives a PCLS of £30,000 from her personal pension plan and immediately recycles £5,000 of this back into her personal pension plan into which she currently contributes £1,500 per month. d. Phil receives a PCLS of £25,000 from his company's group personal pension plan. Six months later he receives a large inheritance and uses part of this to pay £20,000 into a new personal pension plan.

a. No: the PCLS is less than £7,500. b. Yes: the PCLS exceeds £7,500, the contribution of £30,000 is significantly higher than the contributions currently being paid and the contribution exceeds 30% of the PCLS. c. No: although the PCLS exceeds £7,500 the contribution is less than 30% of the PCLS and the increase in contribution would not be deemed to be significant. d. No: although the PCLS exceeds £7,500 and the contribution exceeds 30% of the PCLS the contribution has been made as a result of an inheritance and therefore would not be treated as being pre-planned.

Which of the following scenarios occurring in 2022/23 automatically trigger the MPAA rules? a. A member notifies the scheme administrator that he wishes to convert his capped drawdown fund into a flexi-access drawdown fund, and takes no income in 2022/23. b. A dependant purchases a flexible lifetime annuity from the late member's drawdown pension fund. c. A member receives a payment from a short-term annuity purchased with his flexi- access drawdown fund. d. A member receives a trivial commutation lump sum and two small pots payments.

a. No. A payment would need to be taken from the flexi-access drawdown fund for the MPAA to be triggered. b. No. The member would need to access their own funds flexibly; just taking a dependant's income does not trigger the MPAA. c. Yes. The MPAA rules are automatically triggered where the member receives a payment from a flexi-access drawdown fund (from the fund or via a short term annuity). d. No. Small pots payments and trivial commutation lump sum payments do not trigger the MPAA rules

Colin, aged 64, has one defined contribution pension arrangement. He plans to start to draw an income from this arrangement via flexi-access drawdown from his 65th birthday on 11 October 2022. Colin has no available carry forward and is not subject to the tapered annual allowance in 2022/23. Colin wishes to make a series of payments into his pension while ensuring that he does not incur an annual allowance tax charge in 2022/23. Which of the following payments would achieve this aim? a. Monthly payments of £3,333 (gross) made on 1st of each month starting 1 May 2022. b. Payments of £10,000 (gross) on 1 May 2022, 1 July 2022, 1 November 2022 and 1 February 2023. c. A single contribution of £32,000 (gross) on 1 May 2022 plus monthly contributions of £800 (gross) between 1 June 2022 and 1 March 2023. d. Payments of £5,000 (gross) paid monthly between 1 May 2022 and 1 February 2023.

The answer is c. The only payments made after the trigger event would be the monthly payments made between 1 November 2022 and 1 March 2023 (i.e. five payments of £800 = £4,000). As this does not exceed £4,000 the MPAA is not breached and so the contributions are tested against the £40,000 annual allowance that applies for 2022/23. The total contributions for the year equal £40,000 and so no annual allowance tax charge is due. With all the other answers the pension input after the trigger event exceeds £4,000 and so the MPAA would be breached leading to an annual allowance tax charge.

Which one of the following events occurring on or after 6 April 2015 would not trigger the money purchase annual allowance rules for the member? a. Drawing an income from a flexi-access drawdown fund. b. Taking an uncrystallised funds pension lump sum payment. c. Converting a pre-6 April 2015 capped drawdown pension fund into a flexi-access drawdown fund an immediately drawing an income. d. Crystallising benefits in a defined benefit scheme into a PCLS and a scheme pension.

The answer is d. Receiving a pension commencement lump sum does not trigger the MPAA rules. The funds come from a defined benefit scheme and so the scheme pension purchased cannot trigger the MPAA rules.

Florence entered drawdown in 2005, aged 55. In October 2022 she decides to crystallise another pension fund – this is her first BCE since 6 April 2006. Her original drawdown fund is now a capped drawdown fund. How will this capped drawdown fund be valued against Florence's lifetime allowance?

The maximum amount is 25 × 80% of the maximum capped drawdown income. It is 25 × 80% because this is the factor that is applied to benefits valued against the member's lifetime allowance where these benefits came into payment prior to 6 April 2006 and 80% is used because the maximum GAD income is now 150% of the basis amount.

Carole will be taking benefits from her defined benefit scheme in 2022/23. She will be entitled to a PCLS of £120,000 and her pension will be £40,000. The PCLS is not provided by commutation. Calculate the value of the defined benefit scheme benefits that will be tested against the lifetime allowance

The value of Carole's benefits is: * the value of the pension benefits calculated using a valuation factor of 20:1 – i.e. £40,000 × 20 = £800,000; plus * the value of the PCLS – i.e. £120,000; * the total value therefore is £800,000 + £120,000 = £920,000.

Who of the following would be subject to the MPAA rules in the 2022/23 tax year? 1. Declan, aged 72, who took an UFPLS in June 2020 and has not crystallised any pension benefit since this date. 2. Tanya, aged 56, who crystallises a personal pension plan valued at £100,000 in May 2022 from which she receives £25,000 PCLS and then designates £75,000 to flexi-access drawdown. She then takes an income of £10,000 from her flexi- access drawdown fund in March 2023. 3. Lukas, aged 65, whose only pension is a capped drawdown plan which he started in 2014. In 2022/23 the basis amount is £35,000 and he draws an income of £52,000 from the fund. Choose from the following options. a. 1 and 2 only. b. 1 and 3 only. c. 2 and 3 only. d. 1, 2 and 3.

The correct answer is a. Declan is subject to the MPAA rules because taking an UFPLS is a trigger event for the MPAA rules. This means he is still subject to the MPAA in 2022/23 even though no further benefits have been crystallised.. Tanya is also subject to the MPAA rules as she first accessed the income from her flexi-access drawdown fund in 2022/23. Lukas is not subject to the MPAA rules as he only takes an income from his capped drawdown pension fund and the income he takes is within the maximum permitted (i.e. 150% of the basis amount of £35,000 = £52,500 and he took an income of £52,000).

Bill died in June 2022 at the age of 74 while drawing an income from his capped drawdown pension fund. His fund was valued at £450,000 at the date of his death. His beneficiaries choose to take a lump sum death benefit and it is paid in September 2022. How much will they receive? a. £450,000 b. £337,500 c. £247,500 d. £202,500

a. £450,000. Bill died before reaching the age of 75 and the benefits were paid out within the two year window. Therefore, the payment is tax-free, so his beneficiaries will receive the full £450,000.

Frank, a professional footballer, had a protected pension age of 35 prior to 6 April 2006. He has now reached the age of 35 and decides to take his pension benefits six months after his 35th birthday. By how much, if anything, will Frank's lifetime allowance be reduced? a. His lifetime allowance will not be reduced. b. 2.5%. c. 47.5%. d. 50%.

The answer is c. Frank has 191⁄2 years to go to the normal minimum pension age of 55. The lifetime allowance will be reduced by 2.5% for each complete year between age 35 years and six months and the normal minimum pension age of 55, i.e. 19 years. 19 × 2.5% = 47.5%.

Each of the following pension scheme members has only one pension fund and has nominated a non-dependant to receive their pension benefits when they die. Assuming that in all cases the nominee chooses to take the benefits as a lump sum, in which of the following cases will the benefits be tested against the member’s lifetime allowance? a. Kyler, who died age 56, with uncrystallised funds valued at £430,000. b. Sue, who died aged 76, with unused funds valued at £760,000. c. Sarita, who died aged 67, with funds held in a flexi-access drawdown plan valued at £1,570,000. d. Lucian, who died aged 77, with funds held in a capped drawdown plan valued at £2,340,000.

a. Kyler, who died age 56, with uncrystallised funds valued at £430,000.

Herbert died, aged 60, in March 2022. In January 2021 he had purchased a lifetime annuity with £400,000 of previously uncrystallised funds. Herbert included annuity protection of 60% and when he died he had received gross payments totalling £23,500. Herbert did not nominate anyone to receive his benefits and after an investigation the scheme administrator determined that 60% of the benefits should go to Herbert's mother, Rebekah, aged 83, and the remaining 40% to his brother, Edgar, aged 48. How much will Rebekah and Edgar each receive as an annuity protection lump-sum death benefit if the payments are made in March 2023? a. Rebekah will receive £58,455 and Edgar will receive £38,970. b. Rebekah will receive £71,445 and Edgar will receive £47,630. c. Rebekah will receive £129,900 and Edgar will receive £86,600. d. Rebekah will receive £225,900 and Edgar will receive £150,600

The answer is c Herbert opted for 60% protection (i.e. £400,000 × 60% = £240,000). When he died he had received payments of £23,500, meaning that the 'unused' funds totalled £240,000 – £23,500 = £216,500. Herbert was under the age of 75 when he died and so the payment can be made to his beneficiaries tax-free. This means that Rebekah will receive 60% of £216,500 = £129,900 and Edgar will receive 40% of £216,500 = £86,600.

Meera, aged 73, died in May 2022 and left her uncrystallised defined contribution pension funds to her husband, Rajeev. Which of the following best describes the tax treatment if Rajeev uses these funds to purchase a dependant's annuity in August 2022? a. They will be tested against Meera's lifetime allowance and the income will be taxed as Rajeev's pension income. b. They will be tested against Meera's lifetime allowance but the income will be paid free of income tax to Rajeev. c. They will not be tested against Meera's lifetime allowance and the income will be taxed as Rajeev's pension income. d. They will not be tested against Meera's lifetime allowance and Rajeev will receive the income free of income tax.

The correct answer is b. The funds are being used to purchase a dependant's annuity. Since the funds were uncrystallised, this is now a BCE (BCE 5D) and so there is a test against the member's lifetime allowance. Meera was aged under 75 when she died and so the income received from the dependant's annuity is paid tax free.

Which of the following forms of income may be able to be paid as tax free income to a dependant? i. Scheme pension ii. Flexible annuity iii. Capped drawdown a. i and ii only. b. i and iii only. c. ii and ii only d. i, ii and iii.

The answer is c. A scheme pension is always taxable (the rules did not change as a result of the Taxation of Pensions Act 2014). A dependant's capped drawdown plan may be paid tax free if the income stream did not commence until after 5 April 2015 and the previous holder died under the age of 75. A dependant's flexible annuity set up on or after 6 April 2015 where the member died before their 75th birthday can be paid tax free.

Robbie, aged 56, became non-UK resident as at 1 February 2018 when he moved to Portugal. At the same time he transferred the benefits from his UK registered pension scheme into a QROPS. No further contributions were paid into the QROPS after transfer. Robbie returned to the UK and took up residency again in October 2022. In May 2021 he had taken a payment from his QROPS that, had it been taken from a registered pension scheme, would have been an UFPLS. The payment was the equivalent of £20,000. This is the first payment Robbie has taken from any pension fund and he has no intention of taking any further pension income until he reaches age 65. How will this payment be taxed on Robbie's return to the UK in 2022/23? a. No tax will be payable as all payments from a QROPS are tax free in the UK. b. No tax will be paid as the amount taken while temporarily non-resident is below the threshold. c. He will owe tax if the tax paid in Portugal is below the tax he would have paid in the UK. d. He will have to pay UK income tax at his marginal rate of tax on £15,000.

The answer is b. Even though he has returned to the UK within five tax years of becoming non-resident, the only income he has received from both registered pension schemes and RNUKS during this period is less than £100,000 and so no additional tax is owed in the UK.

Zara, aged 61, has a QROPS. She now intends taking a payment from this pension. Which of the following methods of taking benefits from her QROPS will trigger the MPAA rules? i. Scheme pension. ii. Uncrystallised funds pension lump sum. iii. Income payments from a flexi-access drawdown pension. a. i and ii only. b. i and iii only. c. ii and iii only. d. i, ii and iii.

The answer is c. ii and iii only.

TPR can start the procedure to seek a contribution notice up to a maximum of how many years after an employer deliberately seeks to avoid a statutory debt?

Where there is a deliberate attempt to avoid a statutory debt, TPR can start the procedure to seek a contribution notice up to six years after the act took place.

A complaint must, in the first instance, be referred to the company that sold the product. How long does the company have to resolve the matter to the complainant’s satisfaction before the matter can be referred to the Financial Ombudsman Service? a. 4 weeks. □ b. 8 weeks. □ c. 12 weeks. □ d. 16 weeks.

b. 8 weeks.

If the Pension Protection Fund is to take responsibility for a scheme it must not have commenced wind-up prior to: a. 6 April 2004. □ b. 6 April 2005. □ c. 6 April 2006. □ d. 6 April 2007.

b. 6 April 2005.

Which of the following statements about the Pension Protection Fund are true? 1. All benefits accrued prior to 6 April 1997 will increase in payment by CPI to a maximum of 2.5%. 2. Survivor's benefits for married and qualifying dependants will be 50% of the member's PPF entitlement. 3. All members who have already reached the scheme's normal retirement date at the point the PPF takes responsibility for the scheme will have 100% of their benefits protected. 4. Members who are already in receipt of a pension on the grounds of ill-health will have 100% of their benefits protected.

The correct answers are: b. Survivor's benefits for married and qualifying dependants will be 50% of the member's PPF entitlement; and c. All members who have already reached the scheme's normal retirement date at the point the PPF takes responsibility will have 100% of their benefits protected. There will be no increase to benefits accrued prior to 6 April 1997 (a) and members in receipt of a pension on the grounds of ill-health will have their benefit levels reviewed on a case-by-case basis (d).

FAS payments are usually paid from a scheme’s normal retirement age, subject to a minimum age of: a. 50. □ b. 55. □ c. 60. □ d. 65.

c. 60. □

FRE Ltd would like to offer salary sacrifice with their automatic enrolment scheme. They should be aware it is: a. Not possible to offer a salary sacrifice arrangement with an automatic enrolment □ scheme. b. Only possible to put in place a salary sacrifice arrangement before a jobholder's □ automatic enrolment date. c. Only possible to put in place a salary sacrifice arrangement after a jobholder's □ automatic enrolment date. d. Possible to put in place a salary sacrifice arrangement either before or after a □ jobholder's automatic enrolment date.

d. Possible to put in place a salary sacrifice arrangement either before or after a jobholder's automatic enrolment date.

The automatic enrolment process consists of a number of steps, set out in law, which must be completed before the end of the ‘joining window’. How long is the joining window? a. A one month period that starts from the eligible jobholder’s enrolment date. b. A one month period starting from the employer’s chosen deferral date. c. A six week period that starts from the eligible jobholder’s enrolment date. d. A six week period starting from the employer’s chosen deferral date.

c. A six week period that starts from the eligible jobholder’s enrolment date.

ABC Ltd has chosen NEST as its workplace pension provider. ABC Ltd should be aware that: a. NEST does not allow members to transfer in funds held in other pension pots. b. Members will pay a single charge of 0.5% p.a. c. NEST does not offer a Sharia compliant pension fund. d. The recommended fund is a Retirement Date fund.

d. The recommended fund is a Retirement Date fund.

Which of the pensions listed below can be shared in a divorce settlement? a. Statutory scheme. b. Additional Voluntary Contributions (AVCs). c. SERPS. d. Basic State Pension. e. New State Pension.

a. Statutory scheme. b. Additional Voluntary Contributions (AVCs). c. SERPS

Broadly speaking, equalisation of pension ages must apply to all pension benefits accrued after: a. 17 May 1990. b. 17 May 1992. c. 17 May 1995. d. 17 May 1997.

a. 17 May 1990

Outline the circumstances under which the Trustee in Bankruptcy can gain access to a deferred pension fund.

A TIB can gain access to a deferred pension fund where the TIB can prove that a contribution has been made solely to remove funds from the estate. In this circumstance they can apply to recover the contributions so the funds are made available to them for the re-payment of creditors. Otherwise, under WRPA 1999 and following Horton v. Henry (2014), it has been ruled that the TIB cannot force the bankrupt to access an uncrystallised pension in order for them to apply an income payments order.

Which one of the following complaints would the Pensions Ombudsman investigate? a. Louise, who is unhappy about her level of State Pension benefits. b. Robert, who is unhappy that his employer's occupational defined contribution pension scheme does not allow him to take his benefits using flexi-access drawdown. c. Sarah, who feels that her IFA wrongly advised her to take out a Free Standing AVC contract to top up the benefits she is accumulating in her employer sponsored pension scheme. d. Gary, who is a member of his employer's occupational pension scheme and who feels that they have not invested his funds according to the instructions he has provided.

d. Gary feels that his pension funds have not been invested according to the instructions he has provided. This complaint relates to maladministration and therefore the Pensions Ombudsman would investigate it.

Which of the following courses of action would have an immediate effect on the deficit of a defined benefit scheme? a. Increasing employer contributions. b. Changing a scheme's investment strategy away from equities towards bonds. c. Transferring existing company assets into the scheme. d. Increasing employee contributions. e. Reducing future benefit accrual.

a. Yes b. No: this may limit the extent to which the deficit can increase if market conditions are poor, but this would not have an immediate effect. c. Yes. d. Yes. e. No: this will not have an immediate effect, but it will reduce ongoing costs, which may make the recovery plan more affordable.

A defined benefit scheme’s technical provisions provide an estimate of the: a. Current market value of the assets held by the scheme. □ b. Amount of assets required to pay accrued pensions when they are due to be paid □ in future. c. Amount by which the scheme’s current assets exceed the scheme’s liabilities. □ d. Future projected value of the scheme’s assets over and above the future projected □ value of the scheme’s liabilities.

b. Amount of assets required to pay accrued pensions when they are due to be paid in future.

Trustees are required to report a delay in paying contributions by the employer to TPR once the delay is more than: a. 30 days. □ b. 45 days. □ c. 60 days. □ d. 90 days.

a. 30 days.

Which of the following changes in assumptions would cause a cash equivalent transfer value to increase? a. An increase in revaluation rates. □ b. An increase in annuity rates. □ c. An increase in discount rates.

a. An increase in revaluation rates.

Craig is just about to retire from his company's defined benefit scheme, which has an accrual rate of 60ths. His final remuneration was £27,000 and he has completed 40 years' service in the scheme. He has accrued a full pre-commutation pension of £18,000 p.a. His scheme provides the maximum PCLS under HMRC rules (i.e. 25% of the value of the benefits). The scheme provides PCLS by commutation and the commutation factor is 15:1. Craig's maximum PCLS will be: a. £40,500. b. £83,077. c. £90,000. d. £124,615

The correct answer is b. Craig's maximum PCLS is calculated according to the formula: PCLS = 20 × pre-commutation pension × C / (20+ (3×C)) Where C = the commutation factor used by the scheme. Craig's maximum PCLS therefore is: 20× £18,000×15 = £5,400,000 = £83,077

Which of the following types of defined contribution scheme would be classed as occupational schemes? a. Group personal pension plan. b. Executive pension plan. c. Retirement annuity contract. d. Small self-administered scheme (SSAS). e. A contract-based self-investment personal pension (SIPP).

a. No. A group personal pension plan is a group of individual defined contribution schemes. b. Yes. c. No. A retirement annuity contract is an individual defined contribution scheme. d. Yes. e. No. A contract-based SIPP is an individual defined contribution scheme.

Which of the following statements relating to a targeted money purchase scheme are true? a. The minimum pension the scheme will provide members with is a proportion of final salary at or close to retirement or, if greater, the benefits that can provided by the defined contribution fund. b. The contribution that is paid into the scheme will be the estimated cost of providing the target level of benefit. c. The contribution rate for each member will be regularly reviewed. d. If a member's fund at retirement is not large enough to provide the targeted benefits the employer must top up the member's fund. e. If the employer becomes insolvent the trustees would have no claim against the employer's assets, unless scheme contributions were in arrears. f. Early leavers from the scheme will be entitled to a preserved benefit, the defined contribution assets or a cash equivalent transfer value based on the targeted level of benefits, whichever is the greater.

2 The correct statements are b, c and e. Statement a is incorrect because the scheme will aim to provide a target level of pension based on final salary at or close to retirement. However, there is no guarantee that the targeted level of pension will be provided, as a minimum, and the member may receive a lower level of pension in retirement. Statement d is incorrect because the targeted benefits are an aim and not a promise; the employer can choose to top up the benefits, but does not have to. Statement f is incorrect because early leavers from a targeted money purchase scheme will usually only be entitled to a preserved benefit of the defined contribution assets.

Which of the following statements relating to a statutory money purchase illustration for a regular premium contract are TRUE? a. The protected pension shown on the illustration takes into account the current accumulated fund and accumulated future contributions. b. Inflation is allowed for at a rate of 2.5% p.a. c. The pension figure illustrated always assumes that the annuity purchased increases each year in line with inflation. d. The pension figure illustrated must always include a 50% spouse's pension. e. The pension figure illustrated may be the total pension figure after any PCLS is taken.

The correct statements are a, b and e. Statement c is incorrect because it is not necessary to always show an annuity that increases each year in line with inflation and the illustration may show a level pension instead. Statement d is incorrect because the inclusion of a spouse/civil partner's pension is at the provider's discretion. Where it is included, it should not exceed the maximum amount permitted under the rules of the scheme or legislation, which means that it can be more or less than 50%.

Peter, who was married, died in May 2022 at the age of 46. his personal pension fund was valued at £140,000 and this was his only pension plan. Describe the death benefits that will be paid to Peter's widow and explain how they will be taxed

Peter's widow can receive the entire fund as a lump sum, free of all taxes. Alternatively, she can use the fund to provide an income via a dependant's annuity or flexi-access drawdown. This income would be paid free of income tax as Peter died before the age of 75.

Brenda, who is 53, is in serious ill-health and has been given permission to commute her entire personal pension fund for a serious ill-health lump sum. Brenda's fund is currently valued at £2.1 million. She has no other pension benefits and she has registered for fixed protection 2012. How much will Brenda receive? Return to Serious ill-health commutation on page 3/10 to revise the tax treatment if necessary. a. £2.1 million. b. £1.935 million. c. £1.77 million. d. £1,535,205.

The answer is b. £2.1 million – (£2.1 million – £1.8 million × 55%) = £1.935 million.

Which of the following statements relating to Jennifer's stakeholder pension plan are true? a. The minimum permitted contributions to the stakeholder pension plan must be no higher than £20 per month. b. Jennifer can choose to pay any stakeholder pension contributions by cash. c. The maximum annual charge levied by the stakeholder pension plan must be no more than 1.5% p.a. for the first ten years and a maximum 1% p.a. thereafter. d. Jennifer must be offered the option of a lifestyle fund as the default investment choice.

The correct statements are c and d. Statement a is incorrect because the minimum permitted contribution is £20, with no reference to a required frequency, so a contribution of £20 could be made as a one-off contribution. Therefore the minimum contribution cannot be set as £20 'per month'. Statement b is incorrect because contributions must be accepted by cheque, standing order, direct debit and direct credit, but payments by cash can be refused.