R04 Divorce, employment law and bankruptcy: free practice questions

1. Question 1 of 5

   What are the three ways pensions can be dealt with on divorce?

   Option A: Offsetting, assignment and surrender of benefitsOption B: Offsetting, earmarking and pension sharingOption C: Sharing, declarations of trust and nominationsOption D: Earmarking, commutation and transfer of benefits

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   The answer is B: Offsetting, earmarking and pension sharing

   Pension rights can be offset against other assets, earmarked for future payment to the ex-spouse, or shared at the time of divorce.

   Why the other options are wrong

   A

   Assignment and surrender aren't divorce methods.

   C

   Trusts and nominations aren't the three methods.

   D

   Commutation and transfer aren't the recognised methods.

2. Question 2 of 5

   An earmarked pension starts paying. The member is a higher rate taxpayer; the ex-spouse is a basic rate taxpayer. How is the ex-spouse's share taxed?

   Option A: At 20%, with the member reclaiming the difference laterOption B: Tax-free, as the payment is made under a court orderOption C: At the ex-spouse's own basic rate of income taxOption D: At the member's higher rate, with no reclaim

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   The answer is D: At the member's higher rate, with no reclaim

   The member is treated as receiving all the income, so the whole pension is taxed at the member's rate, and the ex-spouse can't reclaim.

   Why the other options are wrong

   A

   There's no reclaim mechanism.

   B

   It isn't tax-free.

   C

   It isn't taxed at the ex-spouse's rate.

3. Question 3 of 5

   How does pension sharing work for an unfunded public sector scheme such as the Civil Service scheme?

   Option A: A transfer value must be offered; membership needn't beOption B: Only offsetting is allowedOption C: Membership must be offered; a transfer value needn't beOption D: The share must be paid as cash

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   The answer is C: Membership must be offered; a transfer value needn't be

   Unfunded schemes must offer membership but needn't offer a transfer, to avoid harming the scheme.

   Why the other options are wrong

   A

   That's the rule for funded schemes.

   B

   Sharing is allowed with unfunded schemes.

   D

   No cash payment is required.

4. Question 4 of 5

   What is indirect age discrimination?

   Option A: Refusing to employ anyone who has reached State Pension ageOption B: A neutral rule that in practice disadvantages one age groupOption C: Paying older workers more because of their greater experienceOption D: Treating a worker less favourably expressly because of their age

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   The answer is B: A neutral rule that in practice disadvantages one age group

   Indirect discrimination arises from an apparently neutral rule with an age-related effect. It's lawful only if an exemption applies or it can be objectively justified.

   Why the other options are wrong

   A

   That's direct discrimination.

   C

   That may be justified, but isn't the definition.

   D

   That describes direct discrimination.

5. Question 5 of 5

   How are uncrystallised pension rights treated when someone is made bankrupt?

   Option A: They pass in full to the trustee in bankruptcyOption B: They are excluded from the bankrupt's estateOption C: They must be crystallised to pay off the creditorsOption D: They are frozen until all of the debts are paid

   Show answer

   The answer is B: They are excluded from the bankrupt's estate

   The Welfare Reform and Pensions Act 1999 excludes pensions not in payment from the estate. Following Horton v Henry, a bankrupt can't be forced to draw them.

   Why the other options are wrong

   A

   They don't vest in the trustee in bankruptcy.

   C

   Horton v Henry confirmed they can't be forced into payment.

   D

   There's no freezing rule.

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