Past Paper Questions

Question 1

Marie has never been married and died with a taxable estate of £500,000. She made no gifts for
Inheritance Tax (IHT) purposes. How much IHT, if any, is payable on her death?
A. Nil.
B. £35,000
C. £70,000
D. £200,000

Answer 1

C. £70,000

If someone dies and leaves no estate to charity (which would reduce to 36% if was 10% of estate) and not marries so couldn’c carry over nil rate band, then 40% applies on anything over £325k nil rate band.

£500k - £325k = £175k
40% of £175k = £70000

Question 2

Which services are typically provided by a platform?
A. Bank accounts and pensions only.
B. Bank accounts and stockbroker services only.
C. Pensions and stockbroker services only.
D. Bank accounts, pensions and stockbroker services.

Answer 2

D. Bank accounts, pensions and stockbroker services.

Platform providers offer a range of products including the above, life policies & OEICs/ Unit Trusts

Question 3

The proceeds from a non-qualifying onshore life assurance policy held by the original policyholder,
who is a higher-rate taxpayer, will be subject to which tax(es), if any?
A. It will not be subject to tax.
B. Income Tax only.
C. Capital Gains Tax only.
D. Both Income Tax and Capital Gains Tax.

Answer 3

B. Income Tax only.

Whether a policy is qualifying or non qualifying determines its tax treatment. Gains on qualifying policies aren’t taxable, gains on non-qualifying could be subject to income tax.

Question 4

What are the main features of funeral plans?
A. A low sum assured and regular premiums only.
B. A low sum assured and simplified underwriting only.
C. A regular premiums and simplified underwriting only.
D. A low sum assured, regular premiums and simplified underwriting

Answer 4

D. A low sum assured, regular premiums and simplified underwriting

Funeral plans are whole of life contracts designed for those over age 50. They usually have a relatively low sum assured, sufficient to cover funeral expenses, regular premiums and
simplified underwriting

Question 5

For a life assurance policy to be treated as a qualifying policy, at its inception it must have
a minimum term of
A. 1 year.
B. 5 years.
C. 7 years.
D. 10 years

Answer 5

D. 10 years

Whether a policy is qualifying or non qualifying determines its tax treatment. Gains on qualifying policies aren’t taxable, gains on non-qualifying could be subject to income tax.

Question 6

Which type of trust is most commonly used in connection with life and critical illness policies?
A. Bare trust.
B. Discounted gift trust.
C. Gift and loan trust.
D. Split trust

Answer 6

D. Split trust

If a life policy includes CIC or terminal illness benefit, it is normal to use a split trust.
This separates the life and critical illness elements, recognising if the settlor suffers a critical illness, it is likely to want the benefits itself.

Question 7

Under a private medical insurance policy, what is the usual position when the policyholder is
admitted to a National Health Service (NHS) hospital’s accident and emergency department?
A. Cover is not provided.
B. A fixed sum is usually provided.
C. Cover only ever applies to comprehensive policies.
D. A payment is always payable per night spent in hospital.

Answer 7

A. Cover is not provided.

Covers private medical insurance, for NHS not needed.

Question 8

A key feature of a stand-alone critical illness policy is that the policy
A. cannot be placed under trust.
B. has a taxable benefit.
C. has no life cover.
D. usually accrues a surrender value.

Answer 8

C. has no life cover.

CIC pays out if diagnosed with a specified condition, lump sum paid is not subject to tax and can be written in to trust. Has no life cover.

Surrender value: an amount payable if the policyholder decides to exit a flexible whole of
life policy

Question 9

What is the typical deferral period under a accident, sickness and unemployment insurance policy?
A. 7 to 14 days.
B. 30 to 60 days.
C. 3 to 6 months.
D. 1 to 2 years.

Answer 9

B. 30 to 60 days.

ASU is like a shorter term IP policy, benefit is paid for a shorter period (1-2 years) & can be a monthy/ weekly benefit paid.

Question 10

Sarah has a £125,000 discounted-rate, interest-only mortgage. The standard variable rate of interest
rate is 3% and a discount of 0.25% is applied. What monthly interest will Sarah pay?
A. £286.46
B. £312.50
C. £3,437.50
D. £3,750.00

Answer 10

A. £286.46

125,000 / 100 = 1250
1250 x 2.75 = 3437.50
3437.50/ 12 = £286.46

To work out monthly interest, find 1% of value of property then multiply by the interest rate (2.75), then divide that figure by 12

Question 11

A borrower started a mortgage payment protection insurance (MPPI) policy to protect his current mortgage, but now wishes to move house and take out a new mortgage. What rule normally applies
regarding the portability of the MPPI policy?
A. It should be fully portable.
B. It should be surrendered and a new policy started.
C. Portability will depend on the borrower’s state of health.
D. Portability will depend on the difference in amount between the existing and new mortgages

Answer 11

A. It should be fully portable.

MPPI is a form of ASU insurance to protect mortgage payments, pays out after 60 days off work and covers policy holders usually for 1-2 years. MPPI can be portable to another property.

Question 12

35. What is the minimum initial payment that can be made into a National Savings & Investments Direct Saver Account?
    A. £1
    B. £10
    C. £100
    D. £1,000

Answer 12

A. £1

Min savings is £1, can be managed online or by post & withdrawals can be made without notice period or penalty

Question 13

An investor has a holding of £10,000 8% Treasury Gilt 2026 which has a current price of £125. What half-yearly gross income would be received?
A. £320
B. £400
C. £640
D. £800

Answer 13

B. £400

£800 worth of interest received a year (10k x 8%), then halved to make £400 6 monthly payments

Question 14

Convertible bonds allow the holder to convert the bond into
A. fixed-rate notes.
B. floating-rate notes.
C. ordinary shares.
D. perpetual subordinated bonds.

Answer 14

C. ordinary shares.

Type of corporate bond, These bonds carry the right to convert into the ordinary shares of a company at predetermined points during the life of the bond.
If the holder does not exercise the right to convert then it reverts to a conventional bond
that repays on a fixed date.

Question 15

With what frequency do fixed-rate corporate bonds pay coupons?
A. Monthly.
B. Six-monthly only.
C. Annually only.
D. Six-monthly or annually.

Answer 15

D. Six-monthly or annually.

These are conventional bonds and have fixed coupons that are payable either halfyearly or annually and have predetermined maturity/redemption dates.

Question 16

Gilts with up to seven years remaining to redemption are known as
A. shorts.
B. mediums.
C. longs.
D. ultralongs.

Answer 16

A. shorts.

Shorts - up to 7 years left
Mediums - 7 - 15 years left
longs - 15 years +

Question 17

Which type of shares do companies typically issue as part of a return of capital to its shareholders?
A. ‘A’ ordinary shares.
B. Deferred shares.
C. Ordinary shares.
D. Redeemable shares.

Answer 17

D. Redeemable shares.

Most preference shares are undated, but some are redeemable at a predetermined
date or at the option of the company.
On the redemption date, the company will pay the nominal value

Question 18

Who is responsible for the day-to-day management of a unit trust?
A. The Authorised Corporate Director.
B. The depositary.
C. The manager.
D. The trustees.

Answer 18

C. The manager.

The unit trust manager manages the fund and has to be authorised by the Financial
Conduct Authority (FCA) to undertake that role.
They decide which investments are included within the unit trust to meet its
investment objectives.

Question 19

Who is the legal owner of the assets held within a unit trust?
A. The Authorised Corporate Director.
B. The depositary.
C. The manager.
D. The trustees.

Answer 19

D. The trustees.

The trustee is the legal owner of the assets in the trust, holding the assets for the benefit
of the underlying unit holders who are the beneficial owners.

Question 20

What is the main difference, if any, between the annual management charge under a stakeholder
pension scheme and that under other personal pension schemes?
A. There is no difference.
B. Only personal pension scheme charges are capped by legislation.
C. Only stakeholder pension scheme charges are capped by legislation.
D. Both personal pension scheme charges and stakeholder pension scheme charges are capped by
legislation, but at different levels.

Answer 20

C. Only stakeholder pension scheme charges are capped by legislation.

Question 21

What maximum contribution charge can be applied to new contributions to a National Employment
Savings Trust (NEST) account?
A. 0.3%.
B. 1.5%
C. 1.8%
D. 2%

Answer 21

C. 1.8%

Question 22

Where an employee meets the eligibility criteria for an employer’s pension scheme under the auto
enrolment rules, what rule applies regarding joining the scheme?
A. The employee must join immediately and make the required level of contribution.
B. The employee must join immediately, but can opt to make reduced contributions.
C. The employee is automatically enrolled, but only has up to one month to opt out to receive a full
refund.
D. The employee is automatically enrolled, but only has up to three months to opt out to receive a
full refund.

Answer 22

C. The employee is automatically enrolled, but only has up to one month to opt out to receive a full
refund.

An employee between the age of 22 and State Pension age (SPA), who earns more
than £10,000 a year (2024/25), must be auto-enrolled, but can opt-out if they wish.
Employers must meet the minimum contribution requirements

Question 23

Alec dies aged 80 and his flexi-access drawdown pension fund passes to Sam, his civil partner. If Sam
takes income payments from the fund, he will be subject to which tax(es), if any?
A. None.
B. Income Tax only.
C. Income Tax and Inheritance Tax.
D. Inheritance Tax only.

Answer 23

B. Income Tax only.

When pension passes to spouse if other dies after 75, then income subject to normal rates of tax for those using it for income.

Question 24

For an individual to take pension benefits under the trivial commutation rules, the total benefits
must always be less than
A. £20,000
B. £30,000
C. £40,000
D. £50,000

Answer 24

B. £30,000

Trivial Commutation is available to members of defined benefit schemes and to those with defined contribution schemes in payment. It allows such individuals to take their benefits
as a cash lump sum assuming the total of their benefits from all schemes is less than £30,000

Question 25

In what circumstances, if any, can an ISA investor replace withdrawn funds? A. In no circumstances. B. During the same tax year only. C. During the same tax year or the following tax year only. D. In all circumstances.

Answer 25

B. During the same tax year only. Subscription limits apply only to the amount subscribed. If the investor makes a subsequent withdrawal, they have until the end of the tax year in question to replace it up to the subscription limit

Question 26

Where assistance with estate planning is provided by a wealth manager, such a service typically depends on the A. client already receiving the highest service level. B. client’s occupation. C. size of the client’s investment portfolio. D. use of private banking services by the client.

Answer 26

C. size of the client’s investment portfolio.

Question 27

An authorised firm is implementing a low-cost marketing strategy which focuses on real-time feedback determining who reads its literature. Which marketing strategy is the firm most likely utilising? A. Direct marketing. B. E-marketing. C. Multi-level marketing. D. Telemarketing

Answer 27

B. E-marketing.

Question 28

Where children’s cover is provided under a critical illness policy, it is usually on the basis that A. the benefit will be paid if the child meets the survival period. B. the benefit paid is subject to Income Tax at the policyholder’s marginal rate. C. it cannot be reinstated after one claim in any circumstances. D. the policy will cease in the event of a successful claim unless a buyback option is available.

Answer 28

A. the benefit will be paid if the child meets the survival period. Most critical illness policies now include some form of free children’s cover. It offers an additional sum assured payable on the diagnosis of a critical illness in the child of the policyholder, subject to the child meeting the requisite survival period. The sum assured is often quite small.

Question 29

What normally happens to convertible loan stock if the conversion option is NOT exercised by the expiry date? A. It becomes non-voting ordinary shares. B. It becomes conventional dated loan stock. C. It is cancelled without any attaching value. D. It is offered in the stock market to the highest bidder.

Answer 29

B. It becomes conventional dated loan stock.

Question 30

How is a transfer of a unit trust from a husband to his wife treated for Capital Gains Tax purposes? A. Any chargeable gain is immediately liable to tax in the normal way. B. Any chargeable gain is immediately liable to tax, but both annual exemptions can be used. C. No immediate chargeable gain arises and when assessing tax on subsequent disposal, the acquisition date of the husband is used. D. No immediate chargeable gain arises and when assessing tax on subsequent disposal, the acquisition date of the wife is used.

Answer 30

C. No immediate chargeable gain arises and when assessing tax on subsequent disposal, the acquisition date of the husband is used.

Question 31

Zoe, a higher-rate taxpayer, took out an investment bond exactly three and a half years ago with a contribution of £100,000. Since that time, she has NOT made any further contributions or taken any withdrawals. What is the maximum amount that she can withdraw from the bond now, if anything, without incurring an immediate tax liability? A. Nil. B. £5,000 C. £15,000 D. £20,000

Answer 31

D. £20,000 An investor can take a tax deferred income withdrawal from an investment bond each year. This is equivalent to 5% of the initial investment up to a maximum of 20 years after it has been made and until the value of the initial investment has been withdrawn in its entirety. If the 5% isn't used then can be rolled forward, as Zoe is in 4th year can take 20%, 20% of £100k is £20k

Question 32

What type of risk to a saver normally arises from holding a cash deposit? A. Capital risk. B. Inflation risk. C. Institutional risk. D. Liquidity risk.

Answer 32

B. Inflation risk.

Question 33

Jenny has selected a life assurance provider using an online comparison website. The website is most likely to be a A. custodian. B. distributor. C. restricted adviser. D. whole of market adviser

Answer 33

B. distributor. Distributors: firms or platforms who sell the products of another provider - different to an intermediary who will provide advise on the products of another provider.

Question 34

During a fact-find meeting, a financial adviser has asked a client to sign a letter of authority. This is most likely to enable the adviser to A. approach HM Revenue & Customs to confirm the client’s tax status. B. obtain confidential information from the client’s product providers. C. place investments up to a specified limit. D. request salary confirmation from the client’s employer.

Answer 34

B. obtain confidential information from the client’s product providers. Advisers need letters of authority to get in touch with client's providers to get a bigger picture of a client's hard facts (income, assets, liabilities) etc

Question 35

When a policyholder exercises the option to convert his term assurance policy to a whole of life policy, what conditions regarding the provisions of medical evidence or underwriting normally apply? A. No medical evidence or underwriting is required regardless of the policyholder’s state of health. B. The policyholder must complete a declaration of health but further underwriting is only required if a severe deterioration has occurred. C. Medical evidence and underwriting will always be required for sums assured above a specified threshold. D. Medical evidence and underwriting will only be required where conversion is within five years of the end of the policy term.

Answer 35

A. No medical evidence or underwriting is required regardless of the policyholder’s state of health. Whole of life - offers cover till death and will pay a lump sum Term assurance - offers cover offer set term and can be covered in different ways When someone has a convertible assurance plan they can convert it to a whole of life poolicy without medical evidence.

Question 36

Where a reversionary bonus has been added under a traditional with-profits policy, it A. cannot be removed. B. can be removed at maturity in adverse market conditions. C. must then be added at the same rate in each subsequent year until maturity. D. must be for a minimum of 75% of the previous highest reversionary bonus rate

Answer 36

A. cannot be removed. With-profit policies guarantee to pay a minimum level amount of life cover on the death of the life assured: the ‘basic sum assured’. This amount increases annually through the addition of annual (or ‘reversionary’) bonuses. These bonuses are not guaranteed to be declared every year, but once added, they cannot be taken away. The level of bonus applied will be determined by the financial performance of the life company providing the policy.

Question 37

Providers of critical illness insurance policies typically set their required survival periods at A. 7 to 10 days. B. 14 to 30 days. C. 31 to 60 days. D. 61 to 90 days.

Answer 37

B. 14 to 30 days. CIC policies pays out a lump sum when diagnosis of a critical illness takes place and is subject to a survival period. Different policies require different survival periods, with periods of 14 to 30 days being typical. Survival policies are applicable for standalone policies, nocombined/ reviewable. Standalone policies will pay out on survival of the critical illness.

Question 38

Which type of benefit is only normally available under a comprehensive private medical insurance policy? A. Consultant fees. B. Diagnostic treatment. C. Eye treatment. D. Parental stay in hospital.

Answer 38

D. Parental stay in hospital. Claim periods are longer, with higher limits and often a wider choice of hospitals. Services such as home nursing and private ambulances are covered. Most plans also cover the costs involved in a parent needing to stay at the hospital with a child who is ill or injured. Policies can cover a whole family, not just one individual.

Question 39

Where a private medical insurance policy is set up with moratorium underwriting, this indicates that A. cover has been transferred from a previous insurer. B. only specified conditions are included until the insured agrees to be medically examined. C. the policy is part of a package for which a single proposal form has been completed. D. pre-existing conditions are excluded for a number of years.

Answer 39

D. pre-existing conditions are excluded for a number of years. Moratorium Underwriting means the contract can be accepted without medical information.

Question 40

The insured benefit under an individual accident, sickness and unemployment insurance policy is typically expressed as A. a percentage of earnings only if the insured is employed. B. a set amount regardless of employment status only. C. a set amount only if the insured is self-employed. D. either a percentage of earnings or a maximum monthly amounts.

Answer 40

D. either a percentage of earnings or a maximum monthly amounts. Usually a set % or amoint pm to be paid when claim is satisfied

Question 41

A policyholder has protected his mortgage capital with a level term assurance policy. If he survives the term and repays the capital, what is the status of the policy? A. It is allowed to continue for the benefit of the policyholder. B. It ceases with the possibility of a capital surplus. C. It ceases with no capital value. D. It can be converted to another policy type at the option of the policyholder.

Answer 41

C. It ceases with no capital value. Level term insurance pays out a lump sum if the borrower were to die, but the amount of cover, and so the amount payable, remains fixed. This type of cover can provide the protection needed to repay the capital under an interest only mortgage if the borrower were to die early

Question 42

A holder of an offshore bank account, who is both resident and domiciled in the UK, will be exempt from UK Income Tax on the interest only if A. he is a non-taxpayer. B. the account is held outside the EU. C. the account is held within the EU. D. the interest is not remitted to the UK.

Answer 42

A. he is a non-taxpayer. Similarly to onshore accounts, the interest paid is received gross but still liable to income tax. Therefore, UK taxpayers gain no particular benefit from investing in offshore accounts.

Question 43

What rate of tax, if any, is automatically applied at source to the gross interest paid on a bank deposit account of £45,000 held by a higher-rate taxpayer in the tax year 2023/2024? A. None. B. 10% C. 20% D. 40%

Answer 43

A. None.

Question 44

How is the income paid from a National Savings & Investments Income Bond? A. Gross and at a fixed rate. B. Gross and at a variable rate. C. Net of 20% tax and at a fixed rate. D. Net of 20% tax and at a variable rate.

Answer 44

B. Gross and at a variable rate. These pay a monthly income and have no set term. The holder can withdraw their money without notice. Interest is variable and tiered. It is paid gross, but is still taxable.

Question 45

Neil pays £110 per annum into a tax-exempt friendly society savings plan. What is the maximum permitted increase in his annual premium? A. £140 B. £160 C. £190 D. £270

Answer 45

B. £160 Max contribution in to Friendly society plans is £270 per year, £25pm

Question 46

The main difference between ordinary shares and ‘A’ shares normally relates to A. Capital Gains Tax treatment. B. capital redemption. C. dividend levels. D. voting rights.

Answer 46

D. voting rights. Ordinary shares are the amount expressed in the description of the share (e.g £1 share) - this is the amount they can receive if the provider goes bust. Also gives shareholders a share of profits, dividends & voting rights. 'A' Ordinary shares participate in profits and dividends in the same way as ordinary shares. Their main difference is that they are non-voting shares

Question 47

If the share price of an investment trust is 140p and the net asset value per share is 120p, it is trading at a A. discount of 14.3%. B. discount of 16.7%. C. premium of 14.3%. D. premium of 16.7%.

Answer 47

D. premium of 16.7%. When investment trust shares are trading at a premium, the price of the shares is higher than the underlying value of the assets. This is caused by a high demand or low supply, and means that the investor is paying more for the underlying assets than they are worth.

Question 48

The reason that Stamp Duty Reserve Tax would be payable instead of Stamp Duty on a share transaction is because the transaction was A. a gift. B. made through CREST. C. over £10,000. D. paper-based.

Answer 48

B. made through CREST. Purchases of shares are liable to stamp duty reserve tax (SDRT) at a rate of 0.5% of the value of the trade. This does not apply to shares listed on AIM

Question 49

For unit trust distributions to be treated as interest payments for tax purposes, the percentage invested in interest bearing assets must be at least A. 7.5% B. 10% C. 20% D. 60%

Answer 49

D. 60% Dividend distributions are liable to tax in the same way as dividends from shares. Interest distributions from funds that have more than 60% of their assets invested in bonds are liable to tax in the same way as bank or bond interest.

Question 50

A director of a private limited company draws a basic salary of £30,000 per annum. He is also paid a dividend of £10,000 and has benefits-in-kind of £5,000. What are his relevant UK earnings for pension purposes? A. £30,000 B. £35,000 C. £40,000 D. £45,000

Answer 50

B. £35,000 Benefit in kind is a benefit that an individual receives through their employment which has a monetary value. Those that are taxable will be added to an individual’s taxable income and taxed as non-savings income in the traditional way. Dividend doesn't count as earnings for pension purposes.

Question 51

Mike, a higher-rate taxpayer, pays £800 net per annum into a personal pension scheme. How much will the provider claim per annum from HM Revenue & Customs? A. £160 B. £200 C. £280 D. £400

Answer 51

B. £200

Question 52

What is the pension input period of a personal pension plan used to determine? A. The level of relevant UK earnings. B. The level of tax relief on the contribution. C. The tax year in which the contribution will be deemed paid for annual allowance purposes. D. The level of pension commencement lump sum.

Answer 52

C. The tax year in which the contribution will be deemed paid for annual allowance A pension input period is the period over which the contributions to a pension are measured for purposes of an annual allowance test.purposes.

Question 53

Julie, aged 57, is an additional-rate taxpayer and has £400,000 within an uncrystalised personal pension fund. How much of this is she permitted to take and with what tax implications? A. £100,000 tax free. B. £400,000 tax free. C. £400,000 taxed at 25%. D. £400,000 taxed at 45%.

Answer 53

A. £100,000 tax free.

Question 54

Paul is a member of a defined benefit pension scheme with an accrual rate of 1/60ths. He has been a member of the pension scheme for 35 years and has a final pensionable salary of £60,000. To what annual pension will he be entitled? A. £33,000 B. £35,000 C. £37,000 D. £39,000

Answer 54

B. £35,000 £60k x 35/60ths = £35000

Question 55

What happens to an ISA on the investor’s death? A. It can be passed to the surviving spouse only if it remains within the surviving spouse’s allowance. B. It can be passed to the surviving spouse with an additional ISA allowance. C. It immediately matures and must be paid to the investor’s estate. D. It keeps its tax-free status for a minimum of five years.

Answer 55

B. It can be passed to the surviving spouse with an additional ISA allowance. The deceased’s ISA benefits can be passed on to their spouse or civil partner via an additional ISA allowance. This additional allowance is called an Additional Permitted Subscription (APS) and does not impact on the recipients’ own annual personal ISA allowance for the tax year. The APS will represent the higher of; * the value of the ISA at the date of death, or * the value of the ISA at the date of transfer

Question 56

When compared to a conventional personal pension, a distinction about a self-invested personal pension (SIPP) is that it A. allows the policyholder greater choice and control over investments. B. can invest directly in residential property and obtain tax benefits. C. can make loans to the member. D. typically has lower annual management charges.

Answer 56

A. allows the policyholder greater choice and control over investments.

Question 57

An investor has subscribed £7,500 into a cash ISA for this tax year. What type of ISA contribution(s) are permitted in the same tax year? A. A new cash ISA only. B. A new stocks and shares ISA only. C. The existing cash ISA and a new stocks and shares ISA. D. A new cash ISA and a new stocks and shares ISA.

Answer 57

C. The existing cash ISA and a new stocks and shares ISA. Currently, investors can subscribe up to £20,000 for the tax year 2024/25. This overall subscription limit is spread across all cash ISAs, stocks and shares ISAs, and Lifetime ISAs.

Question 58

What difference, if any, applies to the tax treatment of a group critical illness policy benefit paid to an employed person when compared to a similar benefit paid to a self-employed person on an individual basis? A. There is no difference. B. Only the self-employed person receives benefits free of any tax deductions. C. Only the employed person receives benefits after deduction of 10% tax. D. Only the employed person receives benefits after deduction of 20% tax.

Answer 58

A. There is no difference.

Question 59

How, if at all, will an employee who is a member of his employer’s group personal accident and sickness policy be taxed on the benefits and premiums? A. Only on the benefits at the basic rate. B. Only on the benefits at his marginal rate. C. Only on the premiums as a benefit-in-kind. D. He will not be taxed on either.

Answer 59

C. Only on the premiums as a benefit-in-kind.

Question 60

For the purpose of long-term care, at what age would pre-funded care plans be available to an individual? A. At any age. B. 55 years old. C. 60 years old. D. 65 years old.

Answer 60

A. At any age. Pre-funded care plans involve paying a single or regular premium into a ‘common pool’ to insure against a possible future event. Individuals may take out such policies at any age to cover the cost of long-term care in the future.

Question 61

Jennifer incurred a Market Value Reduction (MVR) when she surrendered her investment. This indicates she had invested in A. an ethical fund. B. an index-tracker fund. C. a structured equity fund. D. a with-profits fund.

Answer 61

D. a with-profits fund. The MVR is usually represented as a percentage of the surrender value and is used to compensate for the impact that the individual’s withdrawal from the policy could have on other policyholders

Question 62

An investor bought a residential property for £250,000 with costs of buying of £7,000. The rental income is £1,000 per month with general management expenses of 25% of rental income. What is the net rental yield? A. 3% B. 3.25% C. 3.5% D. 3.75%

Answer 62

C. 3.5% Net rental yield is the amount being received annually compared to the cost of the property. (£750pm for a £257k investment) 750 x 12 = 9000 3.5% of 257,000 is 9000 9000/ 257000 = 0.035 0.035 x 100 = 3.5%

Question 63

Preference shareholders have priority over ordinary shareholders A. for payment of dividends and on liquidation. B. for payment of dividends but not on liquidation. C. on liquidation but not for payment of dividends. D. for neither payment of dividends nor on liquidation.

Answer 63

A. for payment of dividends and on liquidation. Preference shares get dividends before ordinary shares and rank ahead of ordinary in liquidation.

Question 64

Shane earns £30,000 per annum and receives a gross dividend of £10,000 in the current tax year 2023/2024. He has no other income. How much tax will be charged on the dividend payment, if anything? A. Nil. B. £700.00 C. £787.50 D. £1,000.00

Answer 64

.C. £787.50

Question 65

What maximum number of personal pension schemes may an individual withdraw under the small pension pots commutation rules? A. One scheme. B. Two schemes. C. Three schemes. D. Four schemes.

Answer 65

C. Three schemes.

Question 66

Julie is a controlling director and for the previous tax year her gross income of £60,000 was split 40% salary and 60% dividends. If she made the maximum personal tax-relievable contribution for that year, how much did she contribute to her self-invested personal pension scheme (SIPP)? A. £24,000 B. £36,000 C. £40,000 D. £60,000

Answer 66

A. £24,000 24k is 40%