Any answers?

1What is the current normal retirement age band for personal pensions?

a)50-65

b)55-65

c)55-70

d)50-75

2What is the main financial risk specific to a fixed rate mortgage?

a)Interest rates could rise

b)Variable rates could fall and the borrower might be locked into a more expensive mortgage

c)Interest rates could stay the same

d)The borrower could be unable to apply for a further advance

3 From what date did the rules on state help with mortgage interest change?

a)6 April 1995

b)2 October 1995

c)6 April 1997

d)1 January 2000

4 What is the usual maximum age for a mortgage payment protection insurance (MPPI) policy?

a)49 years

b)54 years

c)59 years

d)64 years

5 Other than income, what else does a pension usually produce at retirement?

a)An annual bonus

b)Taxable cash lump sum

c)Tax-free cash lump sum

d)Tax credits

6 Why might a lender be prepared to lend Tony a larger loan than would be normal for a person with his income if he finds an acceptable mortgage guarantor?

a)Because Tony has a good credit score

b)Because Tony's guarantor is an existing customer with an established credit history

c)Because the risk is low - if Tony defaults, the lender will require the guarantor to pay the mortgage

d)Because Tony is confident he can afford the mortgage

7 Why are cash or short-term fixed interest securities unlikely to be a suitable investment for capital released by a lifetime mortgage?

a)They are unlikely to generate sufficient income to cover the mortgage interest

b)They cause a conflict of interest if it is the lender that also provides the investment vehicle

c)They are high risk, as the value of currencies can fluctuate

d)The products are too complicated for the typical lifetime mortgage customer to comprehend

8 Which one of the following is NOT a risk of using a defined contribution pensions scheme as a vehicle for repaying a mortgage?

a)The borrower could retire early and receive lower retirement benefits

b)The government has proposed to make pension mortgages illegal when the new tax reforms for pensions are introduced.

c)The borrower could find there are not enough funds in the pension to provide an adequate tax-free sum to repay the mortgage

d)The employer could reduce its contributions, leading to lower than expected retirement funds

9 Under the Council of Mortgage Lenders' and Association of British Insurers' standards, what minimum period of notice must an insurer give before cancelling an MPPI policy?

a)30 days

b) 60 days

c) 90 days

d) 120 days

10Valerie has a lifetime mortgage with rolled up interest and a separate investment to provide fixed income. Which of the following will affect the value of her income?

a)High inflation

b)Interest rate increase

c)Changes to lender arrangement fees

d)Investment returns

11What (if any) fee may be payable where a lifetime mortgage is stopped early, for example if the property is sold?

a)Arrangement fee

b)Valuation fee

c)Early repayment charge

d)None

12 In what situation might a lender reduce its normal income multiple for a particular borrower?

a)The borrower has little in the way of savings

b)A female borrower might get pregnant and could give up working

c)The borrower's income is expected to rise, so that they could then obtain a bigger mortgage

d)The borrower's income is expected to fall

ANSWERS

1.d) Pension benefits cannot be taken before age 50 (except in the case of serious ill health or for certain limited occupations) and must be taken by age 75

2.b) This is a relative risk - the borrower is not worse off, but might have been better off with a variable rate mortgage

3.b) The new rules only apply to new loans taken out from that date

4.d) Under the CML/ABI code, cover must be available for ages 18-64

5.c) The tax-free cash lump sum is a valuable benefit from a pension plan

6.c) A mortgage guarantor is a second line of security for the lender

7.a) These investments offer low rates of return and are likely to be less than the rate charged on the mortgage

8.b) There is no proposal to make pension mortgages illegal

9.c) The policy may be cancelled or withdrawn by the insurer at a minimum of 90 days' notice

10.a) Only high inflation will affect the value of her income, as her investment provides a fixed income

11.c) An early repayment charge may be made. The sum will vary depending on the scheme

12.d) A professional sportsperson might be in a situation where their earnings are expected to fall if they are towards the end of their professional career