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Personal Financial Planning

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Department of Accountancy and Finance


Personal Financial Planning

Date: Re-sit 2018

Time allowed: 2 Hours

Instructions to Candidates:

This is an unseen closed book examination, except for question 1 which has been circulated in advance.

This exam paper is made up of three sections. Candidates should answer the question in Section A and one out of two questions in each of Section B and Section C. Do not spend too much time on any one question.  The question in Section A is marked out of 40 and all other questions are marked out of 30.

Materials provided:

Tax tables          

Materials allowed:


A calculator may be used in this exam.

Unannotated paper versions of general bi-lingual dictionaries only may be used by overseas students whose first language is not English.  Subject-specific bi-lingual dictionaries are not permitted.


Access to any other materials is not permitted.

Section A – You must answer the question in this section

Question 1


Financial Services are of especial importance to the UK economy. The vote to leave the EU has significant implications for the financial services sector.’




Discuss this statement, setting out the role of the financial services sector in the UK, its significance in terms of both GDP and global status, and the possible impact of the Brexit vote on each area.

Total 40 marks




Section B – You must answer any ONE question from this section.


Question 2

Ahmed and Sadia are a married couple with one child. They received the following income in 2016/17:


  Ahmed Sadia
  £ £
Salary (gross) 59,755 31,790
PAYE deducted 12,900 2,100
Dividends from UK companies 5,500 3,000
Bank deposit interest received   1,020
ISA interest 592 420


Ahmed made a payment to his personal pension of £2,400 net in 2016/17 and Sadia made a gift aid payment of £560.




Calculate the tax payable by Ahmed and Sadia for 2016/17. You are required to comment specifically on the tax treatment of the ISA interest, the personal pension payment and the gift aid payment

Total 30 marks

Question 3

Xiaoyu made no gifts during 2014/15. His transfers during the next two years are as follows:


September  2015 Gift to his cousin on the occasion of his marriage £7,000
September 2015 Gift to NSPCC – UK charity £10,000
February 2016 Gift of a new car worth £8,000 to his sister £8,000
March 2016 Gift to a friend – Yan £250
  Gift to a friend – Fan £100
June 2016 Gift to his uncle £2,500
December 2016 Gift to a trust for the benefit of his niece and nephew £120,000




  1. Calculate the value of each of the gifts after the deduction of any relevant exemptions.


(20 marks)


  1. Li dies on 31 March 2017 leaving an estate with a value of £750,000. Calculate the inheritance tax payable on his death.


(5 marks)


  1. Explain how this calculation would be different if his wife had died in October 2014 and her estate on death was £160,000.


(5 marks)


Total 30 marks




Section C – You must answer any ONE question from this section

Question 4

There have been a number of changes to the pensions systems in the last 2 years.



  1. Identify the main differences between a personal pension and an occupational pension scheme

(10 marks)


  1. What does ‘automatic enrolment’ mean for an individual starting work today


(8 marks)


  1. Why have so many companies and organisations closed their defined benefit pension schemes to new members? Your answer should include an explanation of the different benefits available under these schemes, and demonstrate an understanding of the funding implications for the providers. You should also identify the type of employees for whom a personal pension is more appropriate.

(12 marks)


Total 30 marks

Question 5

You are an independent financial advisor. Gareth and Lottie Isherwood are a married couple aged 54 and 51 respectively.

Gareth works part time and Lottie works full time and they have a combined income of £45,000. They have approximately £10,000 in savings and Lottie makes personal pension contributions which will give her a pension of approximately £4,000 per annum when she retires. They have no other savings. They have 2 teenage children (aged 16 and 14) who live with them in a house worth £275,000. There is a small mortgage of £7,000 outstanding on the house which will be paid off in 2 years. They have life insurance and income protection insurance in place.


Lottie has just learned that her widowed father is seriously ill and is expected to die in the next few months. Lottie is his only child and his wife (Lottie’s mother) died 10 years ago. His estate is likely to be worth £600,000, £475,000 of which is in the value of his house.


They have asked to see you to discuss the inheritance they will receive and in particular to discuss ways in which they might invest it.


  1. Prepare notes for the meeting with Gareth and Lottie. You should consider their current financial position, and ways in which it could be improved. You know that they are relatively risk averse in their approach to investments.

Your notes should discuss the main areas they need to consider, and outline types of investments they could consider. You are not required to make specific recommendations for individual investments, but you should indicate the approximate type of returns they could expect.


(25 marks)

  1. They have also asked you to explain how they will have to pay you for the advice, as they have heard that you can be paid by commissions from the providers of any products they take out on your recommendation.


(5 marks)


Total 30 marks




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