M 4 - Cemap

Test 4

1 / 9

Which one of the following types of life policy is TYPICALLY used in connection with key person assurance?

Personal pension term assurance

Term assurance

Endowment assurance

Whole of life assurance

2 / 9

Which basis would be MOST suitable for a husband and wife seeking to use whole-of-life assurance to cover a likely inheritance tax liability?

Single life on the life of the youngest

Single life on the life of the oldest

Joint life payable on the first death

Joint life payable on the second death

3 / 9

Which one of the following statements in respect of Income Support is correct?

Eligibility is based on the level of National Insurance Contributions made

Claimants must be aged 18 or over

It is not a payment to the claimant but a way of reducing taxable income

It is means tested on both income and savings

4 / 9

Mike is retiring from his company after 25 years. He is planning to take a cash lump sum of £30,000 and £15,000 per annum from his personal pension plan. What will the tax liability be on these benefits?

The lump sum will be tax free but he will pay income tax on the annual pension

He will pay capital gains tax on the lump sum above the annual allowance

He will not have a tax liability on either of the pension benefits

The regular pension will be tax free but Mike will pay basic rate income tax on the lump sum

5 / 9

Which is the INCORRECT statement regarding free standing additional voluntary contributions plans (FSAVCs)?

FSAVCs can be used to supplement the income from an occupational pension scheme

Employers must contribute to an employee’s FSAVC plan

FSA VCs are initiated by the employee

FSA VCs provide an income in retirement

6 / 9

Accident, sickness and unemployment policies provide benefits on which one of the following bases?

Regular income payable for an unlimited period

Regular income payable for a deferred maximum period

Lump sum payable after a short deferred period

Lump sum payable at the end of the term

7 / 9

Which one of the following is the MOST appropriate type of life policy to support an ISA mortgage?

Decreasing term assurance

Level term assurance

Endowment assurance

Whole of life assurance

8 / 9

Irrespective of the type of endowment policy he chooses, Jack has been correctly advised that his policy will:

guarantee to repay the mortgage on death or at maturity.

guarantee to repay the mortgage on death before the maturity date.

ensure a lump sum at maturity in excess of the value of the mortgage.

require additional life cover if interest rates increase over time.

9 / 9

William and Kate have a standard variable rate mortgage which is due to be repaid by an equity based ISA. Which factor would most immediately adversely affect their monthly budgeting?

A fall in the FTSE

A fall in interest rates

A rise in the FTSE

A rise in interest rates

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