NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

SUMMATIVE ASSESSMENT
UNIT STANDARDS 242564, 242613, 2242597 ,242594, 242590 and 230071
SKILLS PROGRAMME: RETIREMENT PLANNING
SECTION A

Multiple choice questions: Circle the letter at each question that is most correct.

1 Which of the following statements best describes the minimum term of a long term
investment portfolio?
A. Minimum term is 5 years and if you cash it in early the proceeds will be taxable.
B. Minimum term is 5 years and you cannot cash in early or change premiums during
this term as this is a contractual agreement.
C. Minimum term is 5 years and if you increase the premium by any amount the term will
be increased by a further 5 years.
D. Minimum term is 5 years and if you increase the premium more than 20% the term will
be increased by a further 5 years.

2. When investing in an insurance policy the funds are invested in terms of the 4 fund
approach. Which of the following descriptions of the funds is incorrect?
A. The individual policyholders’ fund holds the investment of individual investors and is
taxed at a flat rate. The investor receives the proceeds tax-free as they have already been
taxed within the fund.
B. The corporate policyholders’ fund holds the investments placed by companies and
other corporate bodies and is taxed at a flat rate. Once again the proceeds are paid out
tax-free as the returns are taxed within the fund.
C. The corporate policyholders’ fund holds the investments placed by companies and
other corporate investing in deferred compensation plans and is taxed at a flat rate. The
proceeds are paid out and taxed in the hands of the company as the company received a
tax deduction on the premiums.
D. The untaxed policyholders’ fund holds the monies of approved retirement funds,
annuity business and policies belonging to non-tax paying organisations. The fund is not
taxed in terms of the companies’ tax rate and since the last budget there is no taxation
on rentals and interest as there was in the past

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

3. Which of the following insurance products would you use to save a monthly amount
of R1000 to supplement costs for the education of the client’s child in 6 years’ time?
A. Annuity policy
B. Retirement Annuity policy
C. Endowment policy
D. Whole life policy

4. Which of the following products would best protect a client from creditors in the event
of bankruptcy?
A. Whole life policy
B. Retirement Annuity policy
C. Endowment policy
D. Unit Trust

5. If a client with a moderate risk profile wants to get a return that would be at least 3 to
5% higher than inflation over the next 5 to 10 years, which of the following strategies
would they need to adopt?
A. Invest in a conservative investment which limits the exposure to equities and
concentrates on gilts, semi gilts and money market to limit risk.
B. Invest in a balanced fund with a reasonable exposure to equities and other growth
investments, some exposure to property and money market and no more than 15% off
shore.
C. Invest in an off shore fund with 85% of the money invested offshore in equities
D. Invest in a portfolio made up of specialist funds only – gold, emerging markets or
some other specialist fund as the possibility of very high returns is better from a
correctly chosen specialist fund

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

6. Many companies internationally and locally are offering life cycle funds. Which of the
following would be an explanation of how these funds operate?

a) They start with an aggressive mix of equities and bonds in the decades before
retirement and rebalancing, often daily, to maintain diversification. The funds become
more conservative as retirement nears, selling stocks and buying bonds.
b) They are conservative funds which are designed to provide income and security of
capital for those near or at retirement.
c) They are simply funds made up of various unit trusts which allow you to move to more
conservative or risky funds as your situation or lifestyle changes.
d) None of the above is correct

7. Select one of the following additional benefits that will be the most economical to add
as an enhancement to the fund.

A. Income Protection Plan & Dread Disease.

B. Educational Benefit & Funeral Benefits.
C. Funeral Benefits & Spouses Death Benefits.
D. Spouses Death Benefit & Spouses Disability Benefit

8. Explain inclusively costed schemes by selecting the best option from the list below.

A. Management fees are included in the contributions charged.

B. Risk costs are included in the contributions charged.
C. Risk, expenses and management fees and all other related costs are excluded from
the contributions charged.
D. Management fees and risk costs are included in the contributions charged

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

9. Explain exclusively costed schemes by selecting the best option from the list below.

A. Risk costs and management fees are excluded from the contributions charged.
B. Management fees are excluded from the contributions charged.
C. Risk costs are excluded from the contributions charged.
D. Risk, expenses and management fees and all other related costs are included in the
contributions charged

10. Explain rand base schemes by selecting the best option from the list below.

A. Percentage of salary is deducted from payroll for monthly contributions and end
benefits are paid out as a fixed rand amount.
B. A fixed rand amounts are deducted from payroll for monthly contributions and the end
benefits are paid out as a fix rand amount.
C. End benefits are paid out as a multiple of monthly premiums paid.
D. A fixed rand amounts are deducted from payroll for monthly contributions

11. Explain salary based schemes by selecting the best option from the list below.

A. Percentage of salary is deducted from payroll for monthly contributions and end
benefits are paid out as a multiple of salary
B. Percentage of salary is deducted from payroll for monthly contributions and end
benefits are paid out as a fixed rand amount
C. End benefits are paid out as a multiple of salary
D. A fixed rand amounts are deducted from payroll for monthly contributions

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

12. Explain the difference between funded benefits and insured benefits by selecting the
best option from the list below.

A. Funded benefits pays out the death benefit lump sum on death and Insured benefits
pays out the retirement benefit lump sum on death
B. Insured benefits pays out the retirement benefit lump sum on death
C. Funded benefits pays out the retirement benefit on death and insured benefits pay out
the death benefit lump sum on death.
D. Funded benefits pay out the death benefit on death

Case study:
Read the scenario below and answer the questions that follow:
Miss Sarah Ford is a 26 year old single mother and has a daughter Rene, who is 2 years
old. She currently works in a maize factory as a secretary. She earns R108,000 per
annum (13th cheque included) and has worked for the company for four years.
The company she works for does not have a retirement or a medical aid fund.
Sarah’s mother passed away and left her R200,000 in cash and jewellery to the value of
R250,000. Sarah would like to invest it for her retirement.
Sarah lives on the bread line and struggles to look after her daughter. Sarah pays R2,500
rent and R380.00 for water and lights. She pays R250 for a bus coupon to get to work and
back.
Sarah pays R400.00 monthly for her child’s crèche fees. She has R20,000 worth of
furniture debt.
She is saving for a holiday to the Maldives. Sarah does not like to waste money
Sarah’s ex-fiancé Lenny pays her R1,000 for maintenance as and when he can afford it.
(He is currently three months in arrears). Rene is a dependant on Lenny’s medical aid.
Sarah has contacted you to discuss investment options for her inheritance

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

13. Based on Sarah’s current situation, which of the following is an immediate financial
need?

A. Growing old, saving for her retirement.

B. Investing her inheritance money, insuring the jewellery she inherited from her mother.
C. Paying for her child’s education.
D. Saving for a rainy day, unemployment

14. Based on Sarah’s current situation, which of the following is also an immediate
financial need?

A. Getting married, buying a car.

B. Buying a house.
C. Medical Aid, paying off her debts.
D. Saving for her holiday.

15. Based on Sarah’s current situation, which of the following is an intermediate

financial need?

A. Medical aid and retrenchment.

B. Saving for a holiday and buying a car.
C. Saving for her retirement, setting up a Will.
D. Saving for her holiday and her child’s education

16. Based on Sarah’s current situation, which of the following is a long term financial
need?
A. Saving for her holiday and her child’s educational needs.
B. Retirement and long term investments.
C. Buying a car and getting married.
D. Unemployment

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

17. What financial advice would you provide Sarah regarding her inheritance money?

A. Pay off her debts and invest it in a five year Endowment Policy until she is more
financially stable.
B. Invest in Equities.
C. Universal Lifestyle.
D. Pay off her debt and invest in Unit Trusts.

18. What financial advice would you provide Sarah regarding her Retirement needs?

A. Take out a Retirement Annuity.

B. Invest in a 20 year Endowment Plan.
C. Take Out a Whole Life Policy.
D. Preserve her inheritance in a Capital Bond

19. Sarah wants to know what tax rebate she will get on her contributions if she takes
out a retirement annuity?

A. R1800; 7,5% of the contributions.

B. R1750, R3500 or 7,5% of her contributions.
C. Up to a maximum of 27,5%
D. R1750, 3400 of her contributions.

20. Sarah wants to know if she can get her retirement benefit paid to her as a cash lump
sum.
A. Yes.
B. Yes or she can take out a voluntary annuity and invest a portion of the retirement
benefit.
C. No, she must place the full retirement benefit into a compulsory annuity.
D. No, 1/3 will be paid out to her in cash and the other 2/3 will be invested into a
compulsory annuity
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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

21. Sarah would like to retire at age 50, is this possible?

A. Yes, she must just complete the retirement claim forms.

B. Yes but her proceeds will get taxed as a withdrawal benefit.
C. No, as per the Long Term Insurance Act the earliest Sarah can retire is age 65.
D. No, as per the Long Term Insurance Act the earliest Sarah can retire is age 55.

22. Which of the following will NOT identify which risk profile category Sarah belongs
to?
A. Risk Profile Questionnaire.
B. Financial Needs Analysis.
C. State of the economy.
D. Financial Life Cycle

23. Sarah and her new fiancé would like to buy a house, how will this change Sarah’s
financial needs?

A. They will have to take out a Capital Bond policy to cover the costs upfront.
B. They will have to take out a Term Policy.
C. They will have to combine their income and expenses to afford the house.
D. They will have to wait until the economic and political situation stabilises before
venturing into such a big investment

24. Sarah wants to know which of the factors below will have an impact on her
investment solutions and her inheritance.
A. Inflation Rate, Interest Rate, unemployment.
B. Fuel prices, food prices, GDP.
C. Crime Rate, CPI, GDE.
D. All of the above

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

25. Some policies will provide a guarantee that you will not lose your capital and receive
at least a 4% return. Which of the following asset classes would be used by the portfolio
manager to provide guarantees on an investment policy?
A. Equities
B. Properties
C. Derivatives
D. Government stock

26. Which of the following statements about early surrender values on an investment
policy is true?
A. The surrender value policy will always be higher than the intrinsic value due to the
additional profits that have accrued to the policy during its term.
B. The surrender value is the same as the intrinsic value as the client is entitled to the
full value of the fund held on surrender if the policy has run for at least 5 years.
C. The surrender value will be lower than the intrinsic value as the company will need to
recover un-recouped costs (commissions paid and set up costs for the policy) before
paying out the surrender value to the client.
D. The surrender value will be lower than the intrinsic value due to large punitive
penalties for cancelling the contract early which have recently been up held by the
insurance ombudsman as acceptable business practice.

27. Which of the following statements is not about hedge funds and is rather discussing
a unit trust or collective investment?
A. An aggressively managed portfolio of investments that uses advanced investment
strategies such as leverage, long, short and derivative positions in both domestic and
international markets with the goal of generating high returns (either in an absolute
sense or over a specified market benchmark)
B. Legally, these funds are most often set up as private investment partnerships that are
open to a limited number of investors and require a very large initial minimum
investment.
C. For the most part, these funds are unregulated because they cater to sophisticated
investors.
D. An investment vehicle which is comprised of a pool of funds collected from many
investors for the purpose of investing in securities such as stocks, bonds, money market
securities and similar assets

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

28. If a client with a low to moderate risk profile wants to invest in a fund which will
protect the capital and offer some sort of guarantees, which one of the following asset
classes would you expect to be used to provide this sort of protection?
A. Equities.
B. Derivatives.
C. Property.
D. Money Market

29. Which option best explains the economic concept of supply?

a) If the supply for a product or service increases the price will decrease.
b) If the supply for a product or service decreases the price will decrease.
c) If a production of a product is high and these are a lot available this will stimulate the
price upwards.
d) All of the above are correct

30. The stage in the economic cycle known as Boom means that the economy is:
a) Booming and will continue to perform well for some time to come.
b) That the economy is at its highest point and that economic factors could push it into
recession.
c) Is when the economy comes out of a prolonged recession or depression.
d) All of the above are correct

31. What does the acronym GDP stand for in international economics?

a) German Democratic process.

b) Gross domestic product.
c) General discount point.
d) Guaranteed discount product

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

32. CPI is used in economy to provide an index for:

a) Inflation.
b) Interest rates.
c) Industrial activity.
d) None of the above.

33. Which of the following are targets that the minister of finance sets in the budget
speech to set goals for the economy?
a) GDP.
b) CPIX.
c) Interest Rates.
d) All of the above

34. If the inflation rate appears to be under control and the economy is moving into
recession what could the reserve bank do to stimulate the economy?
a) Reduce interest rates.
b) Reduce taxes.
c) Provide subsidies or tax breaks to business.
d) All of the above

35. Which of the following best describes fiscal policy?

a) Setting of taxes to gather income for the state.
b) Setting budgets for expenditure.
c) Setting goals for the economy of SA.
d) All of the above.

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

36. Monetary policy is:

a) The control of interest rates, inflation and protection of the banking structures in SA.
b) Control of the Stock Exchange.
c) Control of financial services.
d) All of the above

37. Which of the following would best describe a depression in the economic cycle?
a) When the economy comes out of recession.
b) What causes an economy to go into recession.
c) A long and hard recession is called a depression.
d) A total collapse of the economy

38. If the GDP is dropping this means that?

a) The economy is improving and productivity is improving.
b) The economy is slowing down and the country is producing less.
c) This is a productivity term which only relates to industry.
d) None of the above.

TOTAL 38 X 2 (76)

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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

SECTION B
SHORT KNOWLEDGE QUESTIONS

1.
What is the difference between nominal interest and effective/real interest? (4)
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2.
If your client’s existing financial provisions for retirement are inadequate, suggest 4
ways that he can realign his retirement goals and lifestyle expectations (4)
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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

3.Give examples of information you should compare a business entity’s information with
in order to determine the excess or shortfall relative to industry norms. (5)
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4.
Explain how the following legislation impacts on group retirement benefits/ group
retirement funds (3 x 3 = 9)
 The Pension Funds Act
 The Tax Act
 FAIS Act
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5. Briefly discuss the difference between active and passive management of an

investment in terms of creating value within the investment (4)
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6.
You need to compile a profile of your organisation with the aim of proposing a retirement
fund option that the organisation can offer their employees. List 8 pieces of information
(data) that you would take into consideration during your analysis (8)
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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

7. Generally, members of an annuity fund, have the option to select from a range of
annuity options. List and explain 5 (five) different types of annuities(5)
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8. Discuss the difference between Cash and Bonds as major asset classes (8)
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NQF 5 WEALTH MANAGEMENT SKILLS PROGRAMME: RETIREMENT PLANNING VERSION 2018/02

SECTION C
LONG QUESTIONS
ANSWER IN ESSAY FORMAT
1.
Discuss the different benefit structures available for group retirement. Use
examples to support your answer (10)
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2
Discuss 4 economic indicators that affect asset classes and global geographic selection
and that you would take into account before making an investment.
Write notes on the advice that you would give an investor in terms of the best return that
he might get in the present economic climate (10)
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3. Explain the purpose of the Pension Funds Act and how it impacts on retirement
planning in terms of tax deductions and tax on withdrawals (10)
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4. Alternative investment strategies are sometimes called a fifth financial asset class.
Discuss any 5 alternative investment strategies that exist
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5.
When it comes to retirement funds, there are a lot of unplanned events that could impact
on the growth of an investment. Identify and explain at least 5 (five) of the major
unplanned life events that could impact on an existing retirement plan. (10)
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