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QFA Financial Planning Errors verified answer questions.

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QFA Financial Planning Errors verified answer
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Alan and Fiona are both aged 48. They are married and have one child,
aged 6.
Alan is a self-employed retailer and earns €70,000 pa. Fiona is a
pensionable employee and earns €50,000 pa.


Alan set up a PRSA a few years ago and contributes €500 pm. He plans
to add in a lump sum of €30,000 as he will get full tax relief at his
marginal rate. Alan has a pension term assurance life policy costing €35
pm and he receives tax relief at the standard rate. Fiona also has the
same policy on her life. Correct Answer-Alan can only claim tax relief on
his PRSA contributions to a maximum of 25% of earnings which is
€17,500 in any year.


In addition, the pension term assurance premiums of €420 are allowed
for tax relief at his marginal rate within this limit of 25% of earnings.


Fiona is in pensionable employment so cannot effect a pension term
assurance plan, unless she has relevant earnings from another source.
Perhaps it is a different form of life cover.


They plan to set up an annual gift of €3,000 each to their child so that
the accumulated funds will not be taxable as a gift or inheritance by him.
Correct Answer-No error.

,Fiona is concerned that if she cannot work due to illness, she will have
no income. She plans to effect a serious illness plan which would pay
her a tax-free income after a certain period of time.
Alan and Fiona have a lump sum for investment. They have decided not
to clear their mortgage as they have a tracker rate and can easily afford
the repayments. Correct Answer-Fiona is an employee and would receive
the state illness benefit if she was unable to work due to illness.


A serious illness plan is a tax-free lump sum, not a tax-free income.


A Serious illness plan does not have a deferred period.


An income protection plan would pay a taxable income and would be
paid after a certain period of time (the deferred period). Perhaps this is
the policy type she plans to effect.


Alan and Fiona have private health insurance, so they do not qualify to
claim tax relief on any medical expenses for themselves, or for medical
expenses incurred by them for Alan's mother. Correct Answer-They may
be able to claim tax relief if their insurance does not cover all of the
costs, for example, specialist treatment, and 'home' care.


An individual can claim tax relief on unreimbursed qualifying medical
expenses incurred in respect of the individual himself or any other
individual on whose behalf he or she pays medical expenses.

, Alan invested in five-year post office savings certificates which were
capital secure and had no investment risk. The funds matured and he
paid DIRT at 33% and USC, but no PRSI on the return. Correct Answer-
The funds in state savings are capital secure but are subject to an
investment risk: inflation risk, as returns are fixed in monetary terms.


The return is tax-free so there is no DIRT or USC payable.


They set up a unit-linked savings plan for their child's education
expenses. The units are priced weekly, but they cannot access it until
maturity. They don't require the funds for twelve years but will take
them at maturity in ten years. The quotation showed an expected growth
pa of 4% so they will have €30,000 at maturity. Correct Answer-A unit
linked savings has no maturity date.


It is open-ended so they can invest for as long as they wish and encash it
at any time, possibly subject to an early encashment
charge.


The units are priced daily.


The expected growth is simply a projection and is dependent on
investment factors such as growth, volatility and timing of unit purchase.


Fiona plans to join her Employer's SAYE scheme. She can save for two
or three years and must then purchase shares in the company, which will

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