Qualified Financial Adviser (QFA) Pensions Exam 1 Practice Test

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• What is pension consolidation?
• A PAO is a legal instrument directing:
• Which statement is accurate about the PAO's effect on retirement benefits?
• ABC Ltd makes a special one-off pension contribution of €260,000 while paying €100,000 as an ordinary annual contribution. How much of the special contribution qualifies for corporation tax relief in the accounting period it is paid?
• Which of the following income sources is relevant for pension purposes?
• In the Mairead scenario, what percentage of the total retirement fund was funded by the member's own contributions?
• What is a money purchase arrangement?
• In a Small Self-Administered Pension Scheme, the Pensioneer Trustee is typically an:
• A consumer's willingness to endure fluctuations in investment returns is best described as the:
• How do investment returns affect a DC pension?
• In a scenario similar to Martin’s, what is the exact amount of the additional withdrawal, before taxes, that must be taken from the ARF before year-end to avoid an imputed distribution?
• Which entity must honor a Pension Adjustment Order's instruction to pay retirement benefits?
• If a salary is €60,000 and a €20,000 bonus, what is the relevant income?
• Tom has a Retirement Annuity Contract which is about to mature at €450,000. He is taking the ARF option but is required to purchase an annuity of €2,250 per annum, in order to avoid having to invest part of the plan value in an AMRF. Assuming an annuity rate of 4%, what amount will he have to use to purchase the annuity of €2,250 per annum?
• What is the EARLIEST age at which a Buy- Out Bond holder can take retirement benefits from their Bond?
• The FIRST Disclosure Notice provided to a client taking out a Retirement Annuity Contract is usually referred to as which type of notice?
• Which risk is specifically associated with the erosion of purchasing power over time?
• A Retirement Annuity Contract matures at 600,000; the owner wishes to buy an annuity that pays 24,000 per year; at an annuity rate of 4%, how much fund is required?
• In a defined benefit pension scheme, what does 'guaranteed benefits' refer to?
• What is the earliest age Emma could draw on her PRSA on early retirement from her current employment?
• An employer operates a pension scheme for its employees. Employees join the scheme for retirement benefits after two years of service. The employer must provide a facility for employees who have not joined the pension scheme to contribute by payroll deduction to at least one:
• Anthea has a vested PRSA. At age 75, which option will NOT be available for the balance of her PRSA?
• Define crystallisation in pension terms.
• Which scenario indicates an early encashment charge on an RAC transfer?
• What is auto-enrolment adequacy?
• John's earnings include a PAYE salary of €50,000, a €50,000 bonus, and a €50,000 dividend. His relevant income would be:
• Keith is a self-employed professional with net relevant earnings of €215,000 in 2020. The MAXIMUM total RAC and PRSA contributions he can claim tax relief on in 2020 is:
• What is a pension transfer value quote?
• A transfer value CANNOT be paid from a Buy-Out Bond to a(n):
• What constitutes a crystallisation event?
• Pension indexation is the adjustment of pension benefits to reflect inflation or cost-of-living changes to preserve purchasing power.
• Jean invests €1,000 now and another €1,000 in a year's time. If she earns an investment return of 5% per year compounded on these investments, what will their total value be after seven years?
• A PRSA holder will receive an Investment Report on his/her PRSA from the PRSA provider every:
• What is the primary purpose of tax relief on pension contributions?
• An employer pension scheme for a large number of employees is established by the employer completing which document?
• Why is record-keeping and governance critical in pensions?
• Which of the following best describes a defined benefit pension benefit?
• Buying a fixed level annuity exposes a retiree to which of the following risks: (i) Bomb out (ii) Investment (iii) Inflation?
• What is the MAXIMUM Personal Fund Threshold which an individual could have obtained at 1st January 2014?
• Jack died in 2020 and in his Will left the balance of his ARF to his friend, Lucy, to whom he was not married or related. How was this payment from Jack's ARF taxed, if at all, by the Qualifying Fund Manager (QFM)?
• What is the impact of early retirement on pension benefits?
• The 'Reason Why' statement provided to a consumer is also known as the Statement of what?
• Patricia cancels a RAC during the cooling-off period when the fund price had fallen by 10% since issue. What is the MAXIMUM refund she is legally entitled to?
• Which of the following is NOT required to be predominantly invested on regulated markets?
• Which document is typically used to specify how pension rights are held on behalf of beneficiaries in a pension arrangement?
• Which one of the following investment transactions by an employer pension scheme would cause an immediate taxable withdrawal from the scheme of the funds and assets involved in the transaction?
• Which statement best describes death-in-service cover in a pension scheme?
• A benefit paid from a vested PRSA following the death of the PRSA holder is taxed as if it were a payment made from a(n):
• Martin is aged 68 and has an ARF valued at €500,000 at 30 November 2020. He has no other ARFs or vested PRSAs. He took a withdrawal of €5,000, before taxes, from his ARF in March 2020. What additional withdrawal, before taxes, must Martin take from his ARF before the end of 2020, to avoid an imputed distribution applying to his ARF for 2020?
• Which statement best describes salary sacrifice?
• What are dormant or inactive pension pots?
• RAC contributions are deductible for tax relief on which taxes?
• Liability to pay PRSI on income currently ceases at which age?
• A corporate bond secured over some of the assets of the company is called a:
• What MINIMUM number of years' service must a member of an employer pension scheme have in order to qualify for a preserved retirement benefit on leaving service?
• The 'Reason Why' statement is also known as the Statement of which concept?
• How many withdrawals can an AMRF holder make from their AMRF in a year?
• Sarah is aged 69 and has an ARF. Any withdrawal she takes from her ARF will be liable to: (i) income tax (ii) USC (iii) PRSI:
• If an annuity is said to have a 'reversion' this means:
• In the context of ex gratia termination payments, which formula represents the amount that is always tax free?
• If an AMRF is valued at €70,000 on 1 July 2020, what is the maximum withdrawal in that scenario assuming no prior withdrawals in 2020?
• How is a defined contribution pension fund typically converted into retirement income?
• For non-members of an employer scheme, which product should the employer typically provide via payroll deduction?
• What is the role of the Pensions Ombudsman?
• A Standard PRSA differs from a Non-Standard PRSA in relation to which of the following: (i) Maximum contribution (ii) Investment funds it can offer (iii) Limit on charges?
• Entitlement to which of the following is subject to a means test? (i) State Pension (Non-Contributory) (ii) State Widow's Pension (Non-Contributory) (iii) State Pension (Contributory)
• A ring fenced amount in a vested PRSA automatically becomes non-ring fenced when the PRSA holder starts to receive pension income payable for his or her lifetime of at least €12,700 per annum. When does this occur?
• Rory holds a Personal Fund Threshold certificate for €5.5 million. In 2020 he matured a PRSA valued at €3 million and has not taken any benefits from other retirement arrangements. What chargeable excess, if any, will arise for Rory in 2020 when taking benefits from the PRSA?
• What is an annuity and when might it be used?
• Karl, aged 65, has an ARF and an AMRF with ABC Life Co. He has no other ARFs or vested PRSAs. In March 2020 he withdrew €1,400, before taxes, from his AMRF. If his ARF is valued at €100,000 at 30th November 2020, what level of withdrawal, before taxes, must Karl take from his ARF before the end of 2020 to avoid an imputed distribution applying to his ARF for 2020?
• In a defined contribution pension, who bears investment risk?
• What are investment risks and how are they managed in pensions?
• A PRSA provider MUST give a PRSA holder a Statement of Reasonable Projection (SORP):
• John has been a member of his employer's DC pension scheme for a number of years. He has now left service. He can take a transfer value from the scheme to a PRSA if he was a scheme member for which period?
• Vested rights in a pension plan refer to which of the following?
• What is death benefit nomination?
• Explain the difference between a group personal pension and a personal pension plan.
• Longevity insurance is insurance against:
• For a retiree making withdrawals from an ARF, which taxes would typically apply to the withdrawal in addition to income tax?
• Which statement best describes auto-enrolment minimum contribution concepts?
• What best defines ill-health early retirement?
• Which minimum service period in a DC pension scheme makes a former member eligible to transfer to a PRSA?
• John is taking a voluntary redundancy package from his employer. His average annual remuneration over the three years prior to the date of termination of employment is €90,000, and he has completed 17 years and 9 months service with his employer. He has no employer pension scheme benefits. What is John's Standard Capital Superannuation Benefit in respect of his ex-gratia termination payment?
• Standard Capital Superannuation Benefit calculation in the ex-gratia termination example primarily uses which element?
• In divorce proceedings, which statement best describes the treatment of pension assets?
• The main benefit of a unitised with profit fund to an RAC holder is:
• Which statement best describes the effect of inflation on the real value of a fixed pension?
• AMRF stands for:
• In the financial planning advisory process, which activity is performed as the second step?
• Which of the following is a common risk to pension planning?
• Explain the concept of the tax-free lump sum from pensions.
• Which of the following is NOT among common risks to pension planning?
• A PAO directs retirement benefits payment to:
• How does salary sacrifice interact with pension contributions?
• A PRSA Investment Report is provided how often?
• Alison's AMRF is valued at €70,000 on the 1st July 2020. What is the MAXIMUM withdrawal Alison could take from her AMRF at that date, assuming she has not taken any previous withdrawal from her AMRF in 2020?
• Under a flexi-access drawdown arrangement, which statement is true?
• Pension contribution tax relief concept.
• A DC employer pension scheme's scheme year runs from 1st July to the following 30th June. For the scheme year 1st July 2019 to 30th June 2020, an Annual Benefit Statement MUST be provided to active members at anytime between 1st July 2019 and:
• What is the typical consequence of taking pension benefits before the planned retirement date?
• What is the rate of inflation over the last 12 months if the Consumer Price Index 12 months ago was 142.5 and today is 148.4?
• If Leah pays €25,000 to her pension in December but can only claim tax relief on €20,000 in that year, what happens to the remaining €5,000?
• How is pension contribution tax relief typically applied?
• Emer has RAC valued at €60,000 and associated Pension Term Assurance policy for €100,000. If Emer died today, what TOTAL amount would be paid out between the two policies?
• Which pension is NOT subject to a means test?
• The right to shop for the best annuity rate among providers when taking a matured retirement fund is called:
• Eric is taking a voluntary redundancy package, after 17 years and 6 months service. He will have a right to take a tax- free lump sum from his employer's pension scheme. What MINIMUM amount of his ex-gratia termination payment will be tax free?
• In a defined contribution context, what does the term 'dynamisation' describe?
• What is a PRSA?
• Which mechanism helps protect a retiree's purchasing power against inflation?
• John terminated his RAC and transferred the value to another RAC; the transfer value was subject to an early encashment charge. This indicates that:
• What is the latest normal retirement age that an employer pension scheme can use?
• If a PRSA matures and you take a lump sum, the portion that exceeds the standard threshold is treated as chargeable excess. Which option best describes this?
• In Mairead's case, what is the maximum lump sum death-in-service benefit the scheme could pay if she died in service today?
• In relation to a Pension Adjustment Order (PAO), contingent benefits include:
• Saoirse is a member of her employer's DC pension scheme. Her marriage has been dissolved by a decree of divorce and her ex-husband has obtained a Pension Adjustment Order (PAO) against her scheme benefits. This PAO is served on:
• What is auto-enrolment in pensions?
• A Pension Adjustment Order (PAO) in relation to retirement benefits will direct the trustees or financial institution to pay part or all of the member's retirement benefit to the beneficiary of the PAO. This is called:
• What is pension sharing on divorce?
• Lucy is retiring from her employer's DB pension scheme, on a pension of €24,000 per annum. She has a separate AVC fund of €150,000. If she uses €100,000 of her AVC fund to provide her maximum tax-free lump sum, what happens to the €50,000 balance?
• Which statement regarding a Preliminary Disclosure Certificate (PDC) is CORRECT?
• Which statement best describes the purpose of a PDC?
• In Karl’s scenario, which ARF withdrawal by end of 2020 would avoid an imputed distribution given the March 2020 AMRF withdrawal?
• A PRSA provider must issue a SORP within seven days of which event?
• Which statement best describes the earliest point at which a Buy-Out Bond holder can take retirement benefits?
• Which of the following statements about death-in-service benefits is true?
• What is the primary purpose of the Pension Protection Fund (PPF)?
• Which statement best describes a defined contribution plan's guarantees?
• What is a practical reason to consider pension consolidation?
• If inflation is 1.5% per year for the next four years, what must an investment of €25,000 grow to in order to keep pace with inflation?
• What is the fundamental difference between a defined benefit pension and a defined contribution pension?
• What is the effect of divorce on pension rights?
• A property investment held outside of a pension arrangement is an example of which pillar of provision for retirement?
• A transfer value can be paid into a Buy-Out Bond from a(n):
• Dividends from an Irish resident company are assessed for income tax under:
• Which statement best describes Group Personal Pension vs Personal Pension Plan?
• Which one CANNOT invest in an exempt unit trust?
• Which statement best describes the relationship between contributions and retirement income in a defined contribution scheme?
• What is the LATEST age by which James must draw on his Retirement Annuity Contract?
• An AMRF automatically converts to an ARF at which age?
• Which of the following is NOT a benefit in kind (BIK) for income tax purposes for the employee concerned?
• Who implements the PAO instruction to pay retirement benefits?
• AVCs can be used to fund an additional: (i) pension (ii) death-in-service benefit (iii) retirement lump sum
• What is the SECOND step in the financial planning advisory process?
• A transfer value CANNOT be paid from a Buy-Out Bond to a(n):
• What is a flexi-access drawdown arrangement?
• Which feature distinguishes a SIPP from a standard personal pension?
• A Pension Adjustment Order (PAO) can be made following which events?
• What is the lifetime allowance?
• The right to buy an annuity with any life company offering the best annuity rate from the maturing proceeds of a Retirement Annuity Contract is referred to as which type of option?
• A PRSA is an example of which pillar of provision for retirement?
• What does PRSA stand for?
• Which of the following scenarios would cause an immediate taxable withdrawal from an employer pension scheme?
• If Aoife dies today, to whom would the proceeds of her Pension Term Assurance policy be paid?
• RAC contributions are deductible, within limits, for: (i) income tax (ii) USC (iii) PRSI:
• What are charges-to-income ratios in pensions?
• Daniel took retirement benefits in 2020 from a PRSA valued at €2.5m. He took a lump sum of €500,000, of which €300,000 was taxed at standard rate, and the balance transferred to an AMRF and ARF. Assuming he took no other retirement benefits previously and is only entitled to the Standard Fund Threshold in 2020, what chargeable excess tax was deducted from his PRSA on maturity in 2020?
• What is the principle of vesting in pension schemes?
• Which risk is specifically about the possibility that plan assets may be insufficient to pay future benefits because people live longer than expected?
• What happens if the lifetime allowance is exceeded?
• Frank retired from the civil service in 2020. He had a chargeable excess tax liability on his public service superannuation benefits of €100,000. What is the MINIMUM reduction in his pension Frank can agree to, in order to discharge his chargeable excess tax liability?
• In which month cannot backdate a Retirement Annuity Contract contribution for tax relief to the previous year?
• What is the annual allowance?
• Which one of the following types of employer pension schemes is NOT required to be predominantly invested on regulated markets?
• Colm joined the Civil Service in 1999. He pays PRSI at which class?
• In a defined benefit scheme, what does the accrual rate represent?
• What factors determine the value of a final salary in a DB scheme?
• Which statement best describes earned versus unearned income in pension terms?
• What was the standard fund threshold limit in 2020?
• How does actuarial smoothing affect pension valuations?
• Which statement about imputed distributions is correct?
• Which statement best describes the role of governance and record-keeping in pensions?
• What is lifestyling in pension investments?
• What is a target date fund?
• Which are typical charges affecting pension funds?
• A consumer's attitude to investment risk is the:
• Andrea's husband has just died. She can qualify for the State Widow's (Contributory) Pension only if she:
• For calculating Revenue maximum retirement benefits provided by an employer pension scheme, 'Service' means which?
• Jamie is aged 62. What limit, if any, applies to the withdrawal, as a percentage of his ARF value?
• In the three-pillar model, which pillar includes private savings outside of state and occupational pensions?
• Annuity rates are currently at historically low levels because:
• If a collective investment fund aims to outperform a particular Stock Market index, it is said to be adopting which investment management style?
• Which of the following statements about PRSI Class A is true?
• Jennifer dies before Luke takes his PRSA benefits. If Jennifer dies before Luke takes his PRSA benefits, what happens to Jennifer's PAO entitlement?
• Which statement about GMP is true?
• NRA stands for which pension term?
• If a defined benefit employer pension scheme is described as integrated, this means:
• John is single. What is the EARLIEST age at which he can qualify for the income exemption limit for income tax purposes?
• What is the purpose of critical illness cover within some pension plans?
• Which of the following best describes the pensions-related complaints the Financial Services and Pensions Ombudsman can investigate?
• What is the role of a pension scheme trustee?
• Which statement best describes auto-enrolment eligibility triggers for employer contributions?
• You have completed a fact-find with a client. The Consumer Protection Code requires you to:
• In anticipation of the AMRF minimum withdrawal rule, which statement is true regarding withdrawals from an AMRF if no withdrawals were made in the year?
• Which statement best describes the impact of inflation on pension planning?
• Under the Consumer Protection Code, what must you do to confirm the accuracy of information after completing a fact-find?
• Who regulates the appointment of Registered Administrators to employer pension schemes?
• What is the role of an actuary in DB pension funding?
• In relation to a defined contribution (DC) employer pension scheme, 'dynamisation' refers to which?
• Which one of the following does NOT require prior approval from the Revenue Commissioners or the Pensions Authority before being marketed or sold to the public?
• Sam is maturing a Retirement Annuity Contract with no other pension arrangements. To avoid investing part of the RAC proceeds in an AMRF or an annuity purchase, what level of pension income should he be in receipt of at that time?
• Sorcha has reached her normal retirement age (NRA) in her employer's DC pension scheme. Her accumulated fund is €80,000. Her best final remuneration is €60,000 per annum, she has no retained benefits, and she has 28 completed years' service. Assuming she opts for the traditional benefit option, what is the MAXIMUM lump sum she can take from the scheme at NRA?
• How can a member consolidate multiple pension pots?
• A penalty or charge CANNOT be levied on the payment of a transfer value from which one of the following?
• What are the MAXIMUM permitted charges which can be levied on a Standard PRSA?
• A Pensioneer Trustee of a Small Self- Administered Pension Scheme (SSAPS) is a(n):
• In a fixed level annuity, which risk is most applicable to retirees?
• A State invalidity pension is potentially payable to qualifying individuals who have been incapable of work for at least how many months?
• USC does NOT apply to:
• The LATEST normal retirement age which an employer pension scheme can use is:
• From which source can a transfer value be paid into a Buy-Out Bond?
• An employer contribution to its pension scheme to provide retirement benefits for a member is:
• Which method must be used to calculate Christina’s final remuneration for maximum approvable retirement benefits in a defined benefit scheme?
• What is a pension input period?
• Which of the following best explains the acronym PFT?
• Which of the following is/are unearned income?
• What is a SIPP?
• Jack is in receipt of the State invalidity pension. This pension will automatically stop when Jack:
• In defined benefit pension funding, what does solvency refer to?
• When an employer contributes to an employee’s pension, how is this treated for income tax purposes in the member’s hands?
• What is a Personal Pension Plan?
• What does GMP stand for in pension terms?
• The basic amount of an employee's ex gratia termination payment which is always tax free is:
• When might a pension transfer out from a defined benefit scheme be restricted?