Q&A - Spring 2021

The CII Financial Assess training package tests your knowledge of key financial topics

Question 1

How does pound cost averaging benefit investors?

A. It creates improved opportunites for portfolio diversification
B. It diminishes the effects of short-term volatility
C. It increases potential returns for a negligible change in overall volatility
D. It lowers the overall cost of making the investment

Question 2

Why is it important for investors to hold some cash in a deposit account?

A. For capital growth
B. For easy access in an emergency
C. To counter the effects of inflation
D. To maintain its real value

Question 3

Which one of the following measures will HMRC regard as unacceptable?

A. Not declaring savings income because it is less than £2,000
B. Putting savings into an ISA so that the income is exempt from tax.
C. Reducing the tax on savings income by making a pension scheme contribution.
D. Transferring savings to a spouse to save tax on the income.

Question 4

Typically, how is a public service pension scheme established?

A. By a directive from the Exchequer
B. By contract
C. By statute
D. Via a trust deed

Question 5

Which of the following elements, if completed, would breach the rules surrounding the abridged advice process?

A. A full fact find
B. A review of the benefits of the existing scheme
C. A Transfer Value Comparator
D. An analysis of the risk of staying in the current scheme 

Question 6

Where an election is made in respect of a trust for a vulnerable beneficiary, how is the income of the trust taxed?

A. The income tax liability is equivalent to that which would apply if the income was received by the beneficiary
B. The income tax liability is equivalent to that which would apply if the income was received by the settlor
C. The trust's income is exempt fromincome tax
D. The trust's income is taxed entirely at the rate of 10%

Question 7

In which of the following situations might top slicing be useful?

A .To bring a tax liability down from additional rate to higher rate
B. To bring a tax liability down from basic rate to starting rate
C. To eliminate the tax liability of someone who would otherwise be a non-tax payer
D. To ensure that age-related allowances are kept intact

Question 8

What is the legal structure of an investment trust?

A. It is a listed investment company
B. It is a trust governed by a trust deed
C. It is an investment company withvariable capital
D. It is an open-ended investment company

Question 9

Which of the following events will normally revoke a valid will?

A. Birth of another child
B. Co-habitation with another person
C. Divorce
D. Marriage

Question 10

Parts of the Mortgage Credit Directive are ‘maximum harmonisation’ which means that:

A. Member states must align their rule making with those of other member states in these areas
B. Member states must seek the permission of the EU to change any of these parts
C. These parts of the directive must be implemented from the same date as in other member states
D. These parts of the directive must be implemented in their entirety without amendment

Answers

1B. Pound cost averaging can offset the effects of volatility, provided the long-term direction of the investment value is upward.

2B. For easy access in an emergency.

3A . Not declaring savings income is illegal. The other three measure are acceptable tax planning techniques.

4C. Public service schemes are typically established by statute and controlled by regulations.

5C. A Transfer Value Comparator.

6A. The effect of an election is to reduce the trustees' income tax liability to that which would apply if the trust's income was received by the vulnerable beneficiary.

 7A. Top slicing relief operates to help bring the gain down

from either a higher rate to a basic rate tax liability, or an additional rate to a higher rate tax liability.

8A. Investment trusts are listed investment companies governed by a memorandum and articles of association.

9D. Marriage will normally revoke an existing will.

10D. Maximum armonisation means that these parts of the directive must be implemented in their entirety without amendment. 

The CII Financial Assess training package tests your knowledge of key financial topics

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