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The Technical Quiz September 6

To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions. Answers below.

Question 1
Legislation sets out how the income payments from a lifetime annuity may be varied each year without resulting in an unauthorized payments charge. Which one of the following explains how the income under a with profits annuity can be varied?

A) In accordance with the retail prices index
B) In accordance with the market value of any freely marketable assets
C) In accordance with an insurance company’s published “Principles and Practices of Financial Management”
D) In accordance with an index reflecting the value of freely marketable assets

Question 2
A “variable lifetime annuity” allows a maximum level of income to be paid each year so long as it doesn’t exceed a percentage of the amount of the annual rate of a level annuity which could be purchased with the sums and assets used to set up the variable annuity.. That maximum percentage is:

A) 55%
B) 95%
C) 100%
D) 120%

Question 3
A “variable lifetime annuity” allows a maximum level of income to be paid each year so long as it doesn’t exceed a percentage of the amount of the annual rate of a level annuity which could be purchased with the sums and assets used to set up the variable annuity. How often does this maximum level of income have to be reviewed?

A) At least every three years
B) At least every five years
C) At least every three years prior to attaining age 75 and annually thereafter
D) At least every five years prior to attaining age 75 and annually thereafter

Question 4
Under the HMRC rules part of a drawdown pension fund can be used to buy a short-term annuity contract from an insurance company. The maximum permitted term for such a short-term annuity is:

A) Three years
B) Five years
C) Ten years
D) Fifteen years

Question 5
The maximum income under income withdrawal as compared to the maximum income available under a series of short-term annuities will be:

A) more under income withdrawal than under the short-term annuity
B) less under income withdrawal than under the short-term annuity
C) it will depend upon whether the short-term annuity is underwritten
D) the maximum income under both options will be the same
Key Option: D)
See RPSM09103640

Questions supplied by Technical Connection

Answers:

1 C)
See SI 2006/568 as amended by SI 2011/1751.

2 D)
See SI 2006/568 as amended by SI 2011/1751.

3 A)
See SI 2006/568 as amended by SI 2011/1751.

4 B)
See RPSM09103640

5 D)
See RPSM09103640

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