Qualified Financial Adviser (QFA) Pensions Exam 2 Practice Test

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• For 2020, part of Ralph's earnings were assessed to USC at a rate of 11%. This is because he:
• What is longevity risk and how might clients address it in pension planning?
• What is the net present value of a pension transfer and why is it important when evaluating a transfer?
• How do currency and geographic diversification impact pension investments?
• Alex, aged 64, has a vested PRSA with a ring-fenced part of €63,500 and a non-ring fenced part of €100,000 as at 30 November 2020. What minimum withdrawal, before tax, must he take from his PRSA before the end of 2020 to avoid an imputed distribution?
• What is indexation in pension schemes?
• James has a Personal Fund Threshold certificate for €5.5 million. In 2020 he withdrew €3.5 million from a Small Self-Administered Pension Scheme. What is the chargeable excess?
• Which document best communicates the outcome after a pension plan review?
• Personal savings held outside of a pension arrangement is an example of which pillar of retirement provision?
• A PRSA product is jointly approved by the:
• Joanne, aged 48, has a preserved benefit in her former employer's DC pension scheme. She has now joined a new employer who operates a DC pension scheme. Which option in relation to her preserved benefit will NOT provide her with the traditional benefit option when she comes to draw on her benefits?
• Which of the following is a valid vehicle to contribute AVCs?
• Which type of employer pension scheme promises a pension at normal retirement age related to earnings over the working life with that employer?
• Which factor is NOT used to determine annuity rates for DC pension fund members, according to the sources?
• What is the fundamental difference in risk between defined benefit (DB) and defined contribution (DC) pension schemes?
• Which part of a retiring employee's remuneration cannot be dynamised when calculating best final remuneration?
• For income tax purposes, a Retirement Annuity Contract contribution is treated as a:
• Which descriptor is used for the Disclosure Notice provided at RAC issue?
• Which of the following is the correct code underpinning the requirement to know the consumer in PRSA advice?
• Pension Adjustment Order over a contingent benefit must be sought within what maximum period after a decree of divorce?
• Which term describes the process of automatically increasing pension benefits to keep pace with inflation where available?
• Which statement about AMRF access is true?
• Ellen has a chargeable excess tax liability of €78,000 arising from her retirement benefits. Which of the following can she offset against this liability?
• What is a 'bridge benefit' and when might it be used?
• The Annual Benefit Statement provided to members of employer pension schemes cannot contain information that is out of date by more than how many months?
• Into which vehicle can an AVC be contributed?
• The SORP for DC employer pension schemes may be contained in which document?
• An Annual Benefit Statement cannot be out of date by more than how many months?
• What are ARF and AMRF, and what is their primary purpose?
• What is the impact of early retirement on pension beneficiaries and guarantees?
• Which pillar of retirement provision covers personal savings and investments held outside a pension?
• What is the purpose of a pension transfer analysis?
• Kate matured a Retirement Annuity Contract and, after taking her lump sum and transferring funds to an AMRF, has €110,000 left. She can use these funds to:
• An annuity provides which type of insurance for the investor?
• Aoife is a proprietary director of her own company and is aged 56. Aoife pays PRSI at which class?
• The trustees of which one of the following schemes can borrow for long-term investment?
• The earliest normal retirement age which an employer pension scheme can use is which of the following?
• If a RAC holder dies today and there are no nominated beneficiaries, the proceeds must be paid to the:
• The SORP may be contained in which document for DC schemes?
• Which body issues a Pension Adjustment Order (PAO)?
• A fund investing exclusively in technology company shares is best described as which type of fund?
• Which of the following is a strategy to address longevity risk?
• A Preliminary Disclosure Certificate must be given to a consumer taking out a PRSA before which event?
• What does commutation mean in retirement income planning?
• What is the limit on the total amount of all tax free ex-gratia termination payments an individual can take over their lifetime?
• What is auto-enrolment and what is its purpose?
• What information should a pension pack include for a client?
• A collective investment fund in which investors can only invest by buying shares in the fund on a stock exchange is called which type of fund?
• Deposit interest subject to DIRT is assessed to income tax under which Schedule?
• Under investment regulations, which asset is considered a 'regulated market' investment?
• What is a key benefit of using a Retirement Annuity Contract Open Market Option when seeking an annuity?
• The acronym ARF stands for which of the following?
• Which of the following options includes the correct combination for voluntary early retirement benefits at age 55 from the options below?
• What personal fund threshold was Jack entitled to apply for at 7 December 2010?
• Luke, aged 62, as of 30 November 2020 has an AMRF valued at €50,000 with ABC Life Co and an ARF valued at €100,000 with a different QFM. He withdrew €1,000 from AMRF in July 2020. What minimum withdrawal, before taxes, must he take from his ARF before the end of 2020 to avoid an imputed distribution applying to his ARF for 2020?
• Anne is aged 72 with an ARF valued at €1,500,000 as of 30 November 2020. If she takes no withdrawal from her ARF in 2020, what notional distribution for income tax purposes will she be deemed to take from her ARF for 2020?
• Which retirement vehicle allows flexibly adjustable contributions and investment options across different funds?
• A transfer value cannot be paid from a Standard PRSA into which of the following?
• In Luke's retirement scenario, the retained lump sum is from a previous employer's pension scheme. Which option best describes this retained lump sum?
• Aoife, a proprietary director aged 56, pays PRSI at which class?
• The acronym ARF stands for which of the following?
• The annuity rate offered to a retiree with a DC employer pension fund will vary by which factors?
• The regular income payable by a bond, expressed as a percentage of the nominal value, is called the:
• From an ARF, withdrawals can be made on a regular basis or on an ad-hoc basis.
• Within a PRSA, which fund type typically carries the highest potential return and risk?
• For a 58-year-old with an ARF, what is the maximum withdrawal limit, as a percentage of ARF value?
• If a life company quotes an annuity rate of 5% for Mary and applies a contract charge of €5 per annum on a €200,000 lump sum, what is Mary's annual annuity?
• A Retirement Annuity Contract can be transferred to which of the following?
• What is the purpose of a transfer value assessment?
• When providing advice to consumers on PRSAs, the requirement to gather and record relevant information about the consumer, known as Knowing the Consumer, arises from which code?
• In a vested PRSA scenario with a total vested amount and €63,500 ring-fenced, what is the unfenced portion?
• Which of the following statements reflects the typical treatment of ARF withdrawals under the given rules?
• What is pension sharing and when is it used?
• How do automation and significant life events influence pension planning?
• What is 'automatic enhancement' in pension plans?
• Deirdre pays €25,000 into a RAC in December 2020 but can only claim tax relief on €20,000 in 2020. What happens to the €5,000 balance?
• Which date is used to determine that retirement benefits do not count toward the threshold amount in the given example?
• What is a vintage or fund life cycle approach in pension funds?
• Which pension planning option provides guaranteed income for life?
• What does portability mean in pension planning?
• How are death benefits typically paid from a pension plan?
• The present value of projected retirement benefits shown in a SORP is calculated using a discount rate of which rate?
• How should a pension adviser assess a client's risk tolerance?
• Pension Term Assurance can run up to which maximum age?
• Aiden died in 2020 and left the balance of his ARF to his son, Paul, who was aged 27 at that time. This benefit was:
• Which of the following is NOT listed as a main risk to pension funds that advisers should disclose?
• Frank retired from the civil service in 2020 with a chargeable excess tax liability on public service superannuation benefits of €100,000. The tax can be recovered by reducing his gross pension over a maximum period of:
• What is the importance of a beneficiary nomination in pension planning?
• In AMRF/ARF arrangements, imputed distributions may apply if no withdrawal is made in the relevant year. True or false?
• What chargeable excess, if any, will arise for James in 2020 when taking benefits from the SSAPS?
• What is the purpose of annual allowance in pension saving?
• Moira, aged 48, is in non-pensionable employment. A Standard PRSA is likely to be more suitable for her than a Retirement Annuity Contract because with a Standard PRSA she can:
• Pension Term Assurance policy can: (i) provide life and serious illness cover; (ii) run up to the life assured's 70th birthday; (iii) not be assigned.
• The FIRST step in the financial advisory process is sometimes called:
• In Saoirse's scenario, when opting for the ARF option, what is the maximum lump sum she can take in total at NRA?
• What MINIMUM amount of his ex-gratia termination payment will be tax free in the example where the employee has not previously received an ex-gratia termination payment?
• Which of the following is/are earned income? (iii) only; (i) Rent; (ii) Deposit interest; (iii) Self-employed trading income
• If John dies before drawing on his PRSA, what happens to Shirley's PAO entitlement?
• Brian's earnings today are €60,000 per annum. He plans to retire in 10 years' time on a pension of 2/3rds of his earnings at that time. What will be his annual pension in 10 years' time assuming his earnings will grow at 2.5% per annum in the meantime?
• Which statement about unused tax relief on RAC/PRSA contributions is true?
• In the absence of nominated beneficiaries and no surviving spouse, RAC proceeds are typically paid to:
• What do we mean by pension transfer value?
• Which statement best describes a Standard PRSA relative to a Retirement Annuity Contract, as described in the material?
• Remuneration for the purposes of an employer pension scheme cannot include which of the following?
• The discount rate used to calculate the present value in a SORP is which of the following?
• Which one of the following individuals is NOT eligible for the State invalidity pension?
• What is a key condition for automatic enhancement features to apply?
• Cian, aged 68, has an AMRF valued at €63,500 as of 30 November 2020. He has not withdrawn from the AMRF in 2020 and has no ARFs or vested PRSAs. What imputed distribution amount, if any, will apply to Cian's AMRF for 2020 if he takes no withdrawal from it in 2020?
• How does a pension adviser ensure suitability for a client?
• How do death benefits interact with the estate for pension plans?
• What does asset allocation define in a pension fund?
• Which descriptor is used for the Disclosure Notice provided at the issue of a RAC?
• Andrew died in 2012 and the balance of his ARF was transferred to an ARF owned by his surviving spouse, Sarah. If Sarah dies now in 2020 and leaves the balance of her ARF to her son, Tom, aged 32, how will this benefit be taxed?
• A lifestyle fund is an investment fund:
• Which statement best describes a Personal Retirement Savings Account (PRSA) and its eligibility?
• If a collective investment fund aims to track the movement of a particular stock market index, it is said to be adopting which investment management style?
• A pensioneer trustee of a small self-administered pension scheme MUST be:
• Which type of benefit helps preserve purchasing power against inflation?
• Which item is NOT typically a type of charge to compare when assessing pension fund costs?
• What is 'dilution levy' in unit-linked funds and when is it charged?
• What do ongoing charges, platform fees, and transaction costs primarily reduce in a pension fund's performance?
• Which statement best describes a defined benefit - final salary scheme?
• How do with-profits funds differ from unit-linked funds in terms of risk and potential returns?
• How should asset allocation typically change as a pension fund holder ages?
• Which formula describes the inflation rate calculation used in the CPI example?
• At what age is voluntary early retirement typically available in the accumulation options described?
• In which year did Ivan join the civil service?
• Lorraine invests €20,000 now for seven years at 5% per annum compounded. What amount will her investment have grown to after seven years?
• Graham is a self-employed doctor. What is the latest age by which he must draw on his PRSA?
• What are some typical regulatory obligations for a pension adviser?
• Which of the following is a key element when evaluating pension fund performance with respect to benchmarks?
• In the Saoirse scenario, if the ARF option is chosen, which amount represents the maximum lump sum at NRA?
• In a Retirement Annuity Contract, what is the benefit of the Open Market Option for a consumer?
• Which statement best describes longevity risk?
• Which type of joint life or single life annuity would provide the lowest initial level of annuity income for a given fund?
• Continuing to work part time after retirement from an individual's main occupation is an example of which pillar of provision for retirement?
• Which statements describe eligibility to contribute to AVCs?
• In Luke's retirement scenario, what is the maximum lump sum the employer's scheme can provide upon retirement at NRA 65 given a retained lump sum of €25,000?
• How does tax relief on pension contributions generally work?
• Why is diversification important within a pension portfolio?
• In the context of RACs and PRSAs, which option would not provide the traditional benefit option when drawing benefits from a preserved DC?
• A collective investment fund which invests only in technology company shares is called which type of fund?
• What effect does smoothing have in a with-profits fund?
• If the Consumer Price Index 12 months ago was 135.3 and today it is 140.0, what has been the rate of inflation over the last 12 months?
• Which of the following consumers would NOT be classified as a vulnerable consumer under the Consumer Protection Code?
• Which statement accurately describes with-profits and unit-linked funds?
• What is the main tax treatment of retirement lump sums and regular pension income?
• Employee PRSA contributions are deductible, within limits, for which taxes?
• The earnings limit for pension contributions is currently set at which amount?
• In a vested PRSA example where the total vested amount is €100,000, what is the ring-fenced portion?
• If Kate achieved an investment return of 5% per annum and inflation over the same year was 2%, what real rate of return did she achieve?
• In the Jamie example, Brigitte is the ex-spouse who obtained a PAO over his PRSA. Who is the PAO served on in that example?
• An employer pension scheme established with a life assurance company for one employee is set up by completing which document?
• Which type of intermediary remuneration is paid annually based on the value of a PRSA held by a client?
• Which statement correctly describes risk allocation in defined benefit versus defined contribution schemes?
• The special additional once-off contribution to the employer pension scheme is €100,000. How much of this will qualify for corporation tax relief in the accounting period in which it is paid?
• What are the typical investment options within a PRSA?
• Which of the following can contribute to a PRSA in the current year?
• Which document governs membership terms, contributions, and benefits of an employer pension scheme?
• A charge taken as a percentage of a contribution paid into a RAC is called which type of charge?
• What is the MAXIMUM percentage of his earnings Shane can claim tax relief on for RAC/PRSA contributions within the €115,000 limit?
• What is the typical process for reviewing a pension plan with a client?
• The document that defines the benefits an employer pension scheme may provide for its members is called which of the following?
• Defined contribution employer pension schemes are also known as which type of scheme?
• What is a unit-linked pension fund?
• Which combination of issues is within the Financial Services and Pensions Ombudsman’s remit for pension provider complaints?
• An employer must pay which minimum proportion of the total ordinary annual contributions paid to its employer pension scheme?
• Continuing earnings in retirement refers to part-time work after retirement. Which pillar does this describe?
• Ivan joined the civil service in 1992. He pays PRSI at which class?
• What is the role of investment risk in pension decision-making?
• The Financial Services and Pensions Ombudsman can investigate and adjudicate on complaints about pension providers in relation to:
• In addition to benefit level, early retirement can influence which of the following plan terms?
• A Statement of Reasonable Projection (SORP) must be provided within how many days after the PRSA contract begins?
• Which date is used to determine that retirement benefits do not count toward the threshold amount in the given example?
• What is the maximum personal contribution Sharon can claim tax relief on in 2020 given a remuneration of €100,000?
• When might a member consider transferring a DB pension to a DC arrangement?
• How can inflation risk affect pension planning and what instruments help mitigate it?
• Which of the following counts against an individual's remaining Standard Fund Threshold amount?
• In Alex's vested PRSA, the ring-fenced portion is €63,500 and the non-ring fenced portion is €100,000. What is the total value of the PRSA?
• A commission paid annually by a life company to an insurance intermediary based on the value of a PRSA held by a client of the intermediary is called which type of commission?
• The Default Investment Strategy (DIS) relates to which aspect of pension schemes?
• How is income drawn from an ARF taxed?
• If a Retirement Annuity Contract (RAC) has a value of €60,000 and is accompanied by a Pension Term Assurance policy for €100,000, what is the total payout if the member dies today?
• Which retirement income options are typically available?
• An AMRF automatically converts to an ARF:
• Buy-Out Bonds are also known as which?
• Upon maturity of a Retirement Annuity Contract (RAC), what amount, if any, must Evelyn transfer to an AMRF or use to buy an annuity from the RAC maturity?
• Which of the following individuals does NOT have a source of relevant earnings for eligibility to contribute to a Retirement Annuity Contract?
• How is a pension fund's performance evaluated?
• What is the maximum withdrawal limit from an ARF as a percentage of the ARF value, applicable to the open market rules?
• What is the term for the regular contributions paid by the employer to the employer pension scheme?
• Who has legal responsibility to issue guidelines on the operation of Pension Adjustment Orders (PAOs)?
• Which statement best describes unit-linked funds?
• Retirement benefits taken from a pension arrangement before which date do not count against an individual's available threshold amount?
• Which statement best reflects the tax treatment of ARF inheritance by a non-spouse, based on the material provided?
• What is the effect of auto-enrolment on employee participation in workplace pensions?
• Emma requires a pension of €10,000 per annum starting in 10 years' time. If the annuity rate applying in 10 years' time for the type of pension she wants will be 4%, what lump sum does she need to invest now to make up that pension in 10 years' time, assuming her investment can earn a return of 5% per annum compound over that period?
• What is a survivor's pension and how is it typically structured?
• If a RAC holder dies with no nominated beneficiaries and no surviving spouse, the death benefit is typically paid to which?
• A PAO is typically granted as a consequence of which life event?
• Which of the following would NOT be classified as a vulnerable consumer under the Consumer Protection Code?
• What are vested rights in an occupational pension?
• Owen, who is single, is receiving the State (Non-Contributory) Pension. This pension will stop automatically if Owen:
• Which item should a pension pack include to help a client assess retirement outcomes?
• In the Jamie example, Brigitte has obtained a PAO over his PRSA. The PAO is served on which party?
• In the case of a special one-off employer contribution, how much qualifies for corporation tax relief in the accounting period in which the payment is made?
• A Certificate of Benefit Comparison is NOT required for a transfer value to be paid in lieu of a preserved benefit from an employer pension scheme to a PRSA if the transfer value is less than which amount?
• Which one of the following is a 'regulated market' investment by an employer pension scheme, for the purposes of the investment regulations?
• Which statement about a Small Self-Administered Pension Scheme (SSAPS) is supported by the material?
• Which document is used to set up a single-employee employer pension scheme with life assurance?
• What is a commutation option?
• If a non-spouse inherits the balance of an ARF from the deceased, how is the benefit taxed?
• Which statement best describes a Lifestyle fund?
• What is an annuity and what trade-offs does it involve?
• Which statement correctly describes ARF and AMRF in retirement planning?
• Deirdre pays €25,000 to the scheme as a personal contribution but can only claim relief on €20,000; what happens to the remaining €5,000?
• How should a client evaluate the trade-off between guarantees and flexibility?
• Aisling has a Retirement Annuity Contract. If she dies today, the proceeds of her RAC must be paid to her:
• What is the purpose of a beneficiary nomination?
• Amy, aged 48, has a Retirement Annuity Contract. She can draw on her plan now if she is:
• Which costs should clients compare when assessing pension fund charges?
• What is AMRF and when can it be converted to an ARF?