Professional Paraplanner’s TDQ (Training, Development and Qualifications) series, is run in conjunction with key support providers, such as Brand Financial Training, and aims to test your knowledge of the financial services market, as part of your overall training goals and exam techniques.
The following questions, which can also be found in our November 2021 issue, relate to examinable Tax year 20/21, examinable by the CII until 31 August 2022.
For the answers go to: Test Your Knowledge: Questions November 2021
QUESTIONS
1. Gary holds a share account with his local building society branch. What benefits might Gary expect in the event of demutualisation?
A. Lower interest rates on borrowings
B. Higher interest rates on savings
C. Increased product range
D. Cash or shares in the new company
2. James has one buy-to-let property and is currently looking to invest in a second. He has been warned that he may suffer liquidity risk. You can tell him that this refers to:
A. the risk of the tenants’ being unable to pay the rent and him having to take legal action.
B. a new government changing fiscal policy resulting in a reduced rental yield.
C. the potential of his being forced to sell a security at a price below its fair value.
D. the risk of his not being able to find tenants when an existing tenant vacates the property.
3. Simon makes payments to his occupational pension scheme by deduction from his pay. What is this method known as?
A. Net pay arrangement
B. Relief at source
C. Gross pay arrangement
D. Relief by claim
4. Priscilla took out a lifetime mortgage with interest roll up some years ago and her lender is not a member of the Equity Release Council or its predecessor Safe Home Income Plans, thus does not have a “no negative equity” guarantee. If on her death her loan plus rolled up interest is more than the value of her house, what likely course of action will the lender pursue?
A. Continue the mortgage with her next of kin
B. Write off the debt
C. Attempt to retrieve the outstanding debt from her estate
D. Rent out the property to recoup the debt using rental income
E.
5. Gordon has decided to save for his retirement using a Self-invested personal pension (SIPP). His adviser should make him aware that: Tick all that apply.
A. loans to an employer cannot exceed 50% of scheme assets.
B. assets such as wines and antiques could give rise to tax charges.
C. the SIPP could be used to buy a commercial property from a “connected person”.
D. loans to an employer are permitted.
6. To qualify for a full new State pension an individual must have a total of how many years’ National Insurance contributions or credits?
A. 26
B. 30
C. 35
D. 39
7. Kelsey, a fund manager with a medium-sized investment firm in the city, has decided to take a significant divergence from his fund’s benchmark and gone overweight in emerging markets. What could this mean?
A. It would suggest Kelsey is seeking out-performance and represents an opportunity for further investment into the fund.
B. Kelsey is an effective fund manager, and this is evidence the fund is actively managed.
C. Kelsey is adopting a contrarian approach to fund selection.
D. The divergence represents greater risk, so greater short-term volatility would be expected in Kelsey’s fund.
8. Ed holds a call covered warrant on DEF Ltd with a strike price of 85p and a parity of 1. At expiry, the underlying shares in DEF Ltd are trading at 97p. What is the cash payout, if any, to Ed?
A. Nil, Ed has made a loss in this instance
B. 12p
C. 15p
D. 85p
9. What is considered to be best practice for an attorney under an EPA/LPA to avoid potential financial abuse of the donor?
A. Employ an accountant to monitor the donor’s finances
B. Run all decisions past the donor’s financial adviser
C. Keep the donor’s money and finances completely separate from the attorney’s
D. Ensure that other family members don’t know what is going on
10. Alex sells a buy-to-let property in this tax year and makes a gain of £35,600. The total costs incurred during both purchase and sale was £16,400. He has NOT used his annual exempt amount. Alex remains a basic rate taxpayer after the sale. How much CGT is due?
A. £690
B. £1,242
C. £1,380
D. £1,932
