R05 Role and limits of State benefits: free practice questions

1. Question 1 of 5

   What is a contributory State benefit?

   Option A: A benefit that the claimant's employer contributes towards each monthOption B: A benefit that is always tax-freeOption C: A benefit paid only to people with low income and limited savingsOption D: A benefit that depends on the claimant's own National Insurance record

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   The answer is D: A benefit that depends on the claimant's own National Insurance record

   Contributory benefits depend on the claimant's NIC record. Means-tested benefits depend instead on income and capital.

   Why the other options are wrong

   A

   Contributory refers to the claimant's own NICs, not employer contributions.

   B

   Contributory benefits aren't always tax-free; new-style ESA and JSA are taxable.

   C

   A benefit for people with low income and savings is means-tested, not contributory.

2. Question 2 of 5

   In what two ways does the provision of State benefits affect the need for private financial planning?

   Option A: They remove the need for private cover altogether and reduce income taxOption B: They reduce the need somewhat, but their low level shows cover is neededOption C: They only affect planning for retirement, not for illness or early deathOption D: They increase insurance premiums and restrict the underwriting available

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   The answer is B: They reduce the need somewhat, but their low level shows cover is needed

   Where State benefits would be paid, the private need can be reduced by that amount. However, benefits are a minimal safety net, which highlights the need for private provision.

   Why the other options are wrong

   A

   State benefits don't remove the need for private cover, and they don't reduce income tax.

   C

   State benefits affect planning for illness and death too, not just retirement.

   D

   State benefits don't affect insurance premiums or underwriting in this way.

3. Question 3 of 5

   Which of the following is NOT a factor that can limit a person's access to State benefits?

   Option A: Means testingOption B: Strict eligibility criteriaOption C: Sanctions for failing to meet DWP requirements, such as missing appointmentsOption D: Holding an income protection policy that has never paid a claim

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   The answer is D: Holding an income protection policy that has never paid a claim

   Means tests, strict eligibility and sanctions can all limit benefits. Simply holding an IP policy that is not paying out does not affect entitlement.

   Why the other options are wrong

   A

   Means testing does limit access: people with income or savings above the limits get less or nothing.

   B

   Strict eligibility rules do limit access, so this isn't the exception.

   C

   Sanctions for not meeting DWP requirements can reduce or stop benefits, so they do limit access.

4. Question 4 of 5

   Which two major changes were introduced by the Welfare Reform Act 2012?

   Option A: Statutory Sick Pay and Child Benefit for every family with childrenOption B: Pension Credit and Attendance AllowanceOption C: The new State Pension and automatic enrolment into workplace pensionsOption D: The benefit cap and the move of legacy benefits into Universal Credit

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   The answer is D: The benefit cap and the move of legacy benefits into Universal Credit

   The Act introduced the benefit cap and the transition of several legacy benefits into a single Universal Credit, whose roll-out has been lengthy.

   Why the other options are wrong

   A

   Statutory Sick Pay and Child Benefit existed long before 2012.

   B

   Pension Credit and Attendance Allowance weren't introduced by the 2012 Act.

   C

   The new State Pension and auto-enrolment came from other legislation.

5. Question 5 of 5

   An adviser recommends a large income protection benefit for a low-income client. Which State benefit consideration should be borne in mind?

   Option A: The IP income may reduce the client's entitlement to means-tested benefitsOption B: IP benefit is added to the benefit capOption C: IP benefit will increase the client's State Pension entitlement at retirementOption D: IP benefit will stop Child Benefit being paid

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   The answer is A: The IP income may reduce the client's entitlement to means-tested benefits

   Income or capital from private provision may reduce entitlement to means-tested benefits at the time of claim, which should be factored into recommendations.

   Why the other options are wrong

   B

   The benefit cap limits total State benefits; private IP income isn't a benefit added to it.

   C

   IP benefit doesn't increase the State Pension; the concern is its effect on means-tested benefits.

   D

   Child Benefit isn't means-tested, so IP income wouldn't stop it.

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