Test Questions Flashcards
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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
d.
State Second Pension
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.
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.
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%.
d.
maximum annual income withdrawal x 25 x 80%.
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.
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.
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%.
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.
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.
d.
£247,000.
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.
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.
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.
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.
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.
d.
£165,000.
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.
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.
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.
