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TDQ: Test Your Knowledge – Questions

30 January 2020

For Professional Paraplanner’s TDQ (Training, Development and Qualifications) series, we have teamed up with key support providers, such as Brand Financial Training, to provide our readers with the very best in training, development and exam support.
This series aims to provide you with valuable advice and guidance materials to help you achieve your training goals, perfect your exam techniques and test your knowledge of the financial services market.
The following 10 questions, which can also be found in our February 2020 issue, relate to examinable Tax year 19/20, examinable by the CII until 31 August 2020.

1. How many qualifying years are needed to receive the full new State pension?
A. 35
B. 36
C. 38
D. 40

2. David is keen to reduce the risk of his assets, what are the 2 ways he could achieve this?
A. Hedging and diversification
B. Correlation and standard deviation techniques
C. Systematic and non-systematic risk applications
D. Efficient frontier theory and risk ratios

3. Kevin is a cautious investor but would like to benefit from the potential returns from property. Which of the following might mean he prefers to do this through an insurance company property fund rather than through a Real Estate Investment Trust (REIT)?
A. The insurance fund should be a lower risk as they cannot utilise gearing
B. He would rather be in a pooled investment with other investors
C. He wants to avoid the 6-month potential deferral period on encashment
D. He wants to use his Capital Gains Tax annual exempt amount on encashment

4. Sheila is being advised to place her life assurance policy in trust. If she does this, which of the following statements is true?
A. The policy remains in Sheila’s ownership until her death
B. The proceeds will go directly to the beneficiaries on her death after probate
C. The policy is not normally protected from creditors if Sheila is declared bankrupt
D. The premiums and the proceeds are normally exempt from inheritance tax

5. Your client Gerald has a portfolio spread across each of the four main asset classes. If the economy is booming, what effect (if any) is it likely to have on the price the fixed interest securities within Gerald’s portfolio?
A. It will have no effect
B. The prices will rise quickly
C. The prices will rise slowly
D. The prices will fall

6. A fund has an average return of 10% per year with a beta of 1.4. This compares to the return on the market of 6% and the risk-free rate of 1.5%. What is the fund’s alpha?
A. 2.06%
B. 1.8%
C. 2.43%
D. 2.2%

7. What benefit might a member of a final salary pension scheme who requires long term care before reaching retirement age under the scheme be able to access?
A. Ill health early retirement benefits
B. All of their benefits paid as an immediate lump sum
C. Waiver of Premium benefit
D. Critical Illness cover

8. Glenda needs to go into residential care following a stroke although she has been told that in a year or so’s time she may have recovered sufficiently to return home to her house valued at £250,000, which she does not wish to sell. She needs to release some funds to help fund her care – which of the following would be least suitable in these circumstances?
A. Lifetime mortgage with drawdown
B. Borrow from relatives
C. Short term letting of the house
D. Home Reversion Plan

9. Kim is 60 and has no taxable income in 2019/20. She has a personal pension valued at £300,000 and she decides to take £40,000 of this fund as a UFPLS. What is the net payment that Kim will receive?
A. £30,000.
B. £32,000
C. £36,370.
D. £36,500.

10. Joanne and Tim are in the process of converting a barn into their home. In order to reclaim the VAT on materials used for the build they need to ensure it was:
A. previously a residential property for at least 10 years
B. built with the environment in mind using only green materials
C. built within eighteen months of buying the materials used in the build
D. previously a non-residential property which hadn’t been lived in for the previous 10 years

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