RO4 Chapter 2

Question 1 of 13

1. Question

What is the tax treatment of the investment profits of a pension fund?

Exempt from income tax, but subject to capital gains tax.
Subject to income tax and capital gains tax.
Subject to income tax, but exempt from capital gains tax.
Exempt from income tax and capital gains tax.

Question 2 of 13

2. Question

Richard took the benefits from his money purchase pension scheme in May 2018. He is now receiving an income that is payable for his lifetime, but which can be reduced to any level he chooses whenever he wishes. He is MOST likely to be in receipt of a:

capped drawdown pension.
scheme pension.
flexi-access drawdown pension.
flexible lifetime annuity.

Question 3 of 13

3. Question

Changing employment trends have seen an increasingly mobile workforce. This has an adverse effect on the level of pension savings because:

most people experience a period of unemployment when no pension benefits are being accumulated.
most people stop and start pension contributions as they change employments.
people's salaries tend to be lower due to the number of times they change employment.
most employers enforce a one year waiting period to join an employer sponsored pension arrangement.

Question 4 of 13

4. Question

Which of the following is considered a ‘hybrid’ scheme?

Section 32 contract.
Targeted money purchase scheme.
Small self-administered scheme.
Executive pension plan.

Question 5 of 13

5. Question

There are a number of reasons why people may fail to save enough towards their retirement. Which of the following is NOT one of these reasons?

There is a limit on how much can be paid into a pension plan each year.
Benefits cannot generally be taken before the minimum pension age of 55.
There is a limit to the amount of the fund that can be taken as a tax-free cash lump sum.
Pensions are perceived as complex and costly.

Question 6 of 13

6. Question

The Government initiative that has had the GREATEST impact on increasing the level of private pension saving in the UK over recent years is the:

removal of the age allowance.
introduction of auto-enrolment.
equalisation and increase of the State Pension Age for both men and women.
introduction of the new State Pension.

Question 7 of 13

7. Question

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.but Edward only receives £14,000 p.because Harry purchased his lifetime annuity in:

2000, whereas Edward purchased his lifetime annuity in 2018.
2017, whereas Edward purchased his lifetime annuity in 2000.
1990, whereas Edward purchased his lifetime annuity in 2000.
1990, whereas Edward purchased his lifetime annuity in 2018.

Question 8 of 13

8. Question

Abigail, who was born in June 1963, will have a State Pension Age of:

68.
67.
65.
66.

Question 9 of 13

9. Question

Dennis is a member of a pension scheme which aims to provide him with 50% of his final salary at retirement. The funding rate is regularly reviewed, but there are no guarantees that Dennis will actually receive 50% of his final salary at retirement. What type of scheme is Dennis MOST likely to be a member of?

A final salary scheme.
A self-invested personal pension.
A small self-administered scheme.
A targeted money purchase scheme.

Question 10 of 13

10. Question

Typically, the main reason cited for an individual saving insufficient amounts into a pension plan is:

mistrust of the industry.
high charges on pension contracts.
lack of affordability.
lack of access to a defined benefit scheme.

Question 11 of 13

11. Question

Which of the following was NOT replaced by the new State Pension when it was introduced in April 2016?

Basic State Pension.
State Second Pension.
State Guarantee Credit.
State Savings Credit.

Question 12 of 13

12. Question

Anna runs a limited company. She has one employee, Tim, and as part of his remuneration package Anna pays 5% of Tim’s salary into his personal pension plan. Anna should be aware that for the purposes of tax relief this contribution will be treated as:

an employer contribution, which will be relievable against the company's corporation tax bill.
an employee contribution, which will be relievable against Tim's income tax bill.
a salary sacrifice payment, which will reduce the salary Tim pays income tax on.
an employer contribution, which will be relievable against her income tax bill.

Question 13 of 13

13. Question

Dennis has a pension scheme which aims to provide him with 50% of his final salary at retirement. The funding rate is checked often, but there are no guarantees that Dennis will receive 50% of his final salary at retirement. What type of scheme is Dennis MOST likely to be in?