R01 Saving and investing: free practice questions

1. Question 1 of 5

   As a rough guide, how large should an emergency fund be for someone who is earning?

   Option A: 10% of the value of their pension fundOption B: Three to six months' expenditureOption C: Twelve months' gross incomeOption D: One month's essential expenditure

   Show answer

   The answer is B: Three to six months' expenditure

   Three to six months' expenditure is a common guide for earners. For those living on capital, around 10% of total investments is typical.

   Why the other options are wrong

   A

   10% of total investments is the guide for those dependent on capital, not 10% of a pension fund.

   C

   A year's income is more than the usual guideline.

   D

   One month is generally too little to cope with a real emergency.

2. Question 2 of 5

   What personal savings allowance does an additional-rate taxpayer have?

   Option A: £5,000Option B: £0Option C: £500Option D: £1,000

   Show answer

   The answer is B: £0

   Basic-rate taxpayers have £1,000, higher-rate £500, and additional-rate taxpayers get no personal savings allowance.

   Why the other options are wrong

   A

   £5,000 is the starting-rate band for savings.

   C

   £500 applies to higher-rate taxpayers.

   D

   £1,000 applies to basic-rate taxpayers.

3. Question 3 of 5

   A fund avoids tobacco firms, weapons manufacturers and major polluters. Which approach is it using?

   Option A: Negative exclusionsOption B: Positive selectionOption C: Passive trackingOption D: Stewardship

   Show answer

   The answer is A: Negative exclusions

   Negative exclusions avoid particular sectors or behaviours. Positive selection screens in assets meeting set criteria, and stewardship involves encouraging companies to raise ESG standards.

   Why the other options are wrong

   B

   Positive selection 'screens in' assets that meet criteria.

   C

   Passive tracking simply follows an index.

   D

   Stewardship involves engaging with companies, not excluding them.

4. Question 4 of 5

   An investment trust's share price is below the value of its underlying assets. How is it described?

   Option A: GearedOption B: SuspendedOption C: Trading at a discountOption D: Trading at a premium

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   The answer is C: Trading at a discount

   When demand is low and the share price is below the value of the underlying assets, the trust trades at a discount. Above that value, it trades at a premium.

   Why the other options are wrong

   A

   Gearing means borrowing to invest, not the price/asset relationship.

   B

   Suspension means trading has been halted.

   D

   A premium means the price is above the asset value.

5. Question 5 of 5

   What is the overall ISA subscription limit for 2026/27, and how much of it can go into a Lifetime ISA?

   Option A: £15,000 overall, with up to £4,000 in a Lifetime ISAOption B: £20,000 overall, with up to £9,000 in a Lifetime ISAOption C: £20,000 overall, with up to £4,000 in a Lifetime ISAOption D: £24,000 overall, with up to £5,000 in a Lifetime ISA

   Show answer

   The answer is C: £20,000 overall, with up to £4,000 in a Lifetime ISA

   The ISA limit is £20,000, which can be split between cash, stocks and shares and innovative finance ISAs; up to £4,000 of it can go into a Lifetime ISA.

   Why the other options are wrong

   A

   The overall limit is £20,000.

   B

   £9,000 is the Junior ISA limit.

   D

   The figures are £20,000 overall and £4,000 for a Lifetime ISA.

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