R04 DB retirement, ill-health and death benefits: free practice questions

1. Question 1 of 5

   Jo retires at normal pension age after 30 years in a 1/60th scheme with final pensionable pay of £40,000. What is her pension before any commutation?

   Option A: £18,000Option B: £24,000Option C: £20,000Option D: £15,000

   Show answer

   The answer is C: £20,000

   30/60 x £40,000 = £20,000 a year.

   Why the other options are wrong

   A

   £18,000 uses 27 years.

   B

   £24,000 uses 36 years.

   D

   £15,000 uses an 80ths accrual rate.

2. Question 2 of 5

   How does GMP indexation differ for someone reaching SPA after 6 April 2016?

   Option A: The State no longer tops up GMP increasesOption B: Pre-88 GMP now rises by CPI up to 3%Option C: The scheme must now increase all GMP by CPIOption D: GMP is converted to new State Pension

   Show answer

   The answer is A: The State no longer tops up GMP increases

   For those reaching SPA from April 2016, the State doesn't add CPI increases on GMP. Pre-88 GMP is level and post-88 GMP rises by CPI up to 3% from the scheme.

   Why the other options are wrong

   B

   Pre-88 GMP has no statutory increase from the scheme.

   C

   Schemes don't have to give full CPI.

   D

   GMP remains a scheme benefit.

3. Question 3 of 5

   Under the industry Code of Practice on incentive exercises, what is NOT allowed?

   Option A: Offering it to members over 80 only on an opt-in basisOption B: Allowing members at least three months to decideOption C: A payment to encourage the member to take adviceOption D: A cash bonus paid only if the member accepts the offer

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   The answer is D: A cash bonus paid only if the member accepts the offer

   Cash incentives that depend on accepting are banned. Payments to encourage advice are allowed, members get at least three months and over-80s must opt in.

   Why the other options are wrong

   A

   Over-80s should only be included on an opt-in basis.

   B

   Three months is the minimum, so this is expected.

   C

   Incentives that don't depend on acceptance, such as paying for advice, are allowed.

4. Question 4 of 5

   Sue retires four years before normal pension age with an accrued pension of £18,000. The scheme reduces pensions by 0.5% for each month early. What is her pension?

   Option A: £17,640Option B: £13,680Option C: £14,400Option D: £16,920

   Show answer

   The answer is B: £13,680

   48 months x 0.5% = 24%. £18,000 x 76% = £13,680.

   Why the other options are wrong

   A

   £17,640 applies only 2%.

   C

   £14,400 applies 20%.

   D

   £16,920 applies 6%.

5. Question 5 of 5

   A scheme pays 4 x salary and a spouse's pension of 50% of prospective pension in a 1/60th scheme. Ali dies with 20 years done, 5 to go, on £36,000. What is the spouse's pension?

   Option A: £6,000Option B: £7,500Option C: £9,000Option D: £15,000

   Show answer

   The answer is B: £7,500

   Prospective service is 25 years: 25/60 x £36,000 = £15,000. 50% = £7,500. The lump sum would be £144,000.

   Why the other options are wrong

   A

   £6,000 uses service to date only.

   C

   £9,000 isn't produced by the rules.

   D

   £15,000 is the full prospective pension.

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