Fiona's client, Mr. Pike, aged 67, is not satisfied with the returns on the investments in his retirement plan.

He wants to meet with her later today to discuss his retirement plan and Fiona's service. Fiona has not spoken to Mr. Pike for almost five years so she reviews her notes in preparation for the meeting. According to her notes from five years ago:

April 12th: She met with Mr. Pike to determine his financial position and income potential. Mr. Pike completed data-gathering worksheets, which are all on file.

April 29th: After reviewing Mr. Pike's financial statements, she met with Mr. Pike again to help him establish his retirement objectives. Mr. Pike wrote his objectives down and Fiona retained a copy for her files.

May 12th: After calculating the income Mr. Pike would need at retirement and several strategies to achieve the required level of savings, she met with Mr. Pike again to explain her recommendations.She gave Mr. Pike a copy of the recommended strategies that he had approved and Fiona kept a copy for her files.

May 13th to July 18th: Fiona telephoned Mr. Pike several times to ensure that he was implementing the strategies as agreed. She also reviewed the investments selected by an investment specialist whom she had recommended to Mr. Pike and determined that those investments were appropriate.All strategies were implemented as agreed.

In the course of carrying out the financial planning process, what, if anything, has Fiona omitted to do, or done incorrectly? O a) April 12th: She met with Mr. Pike to determine his financial position and income potential. Mr. Pike

completed data-gathering worksheets, which are all on file.

O b) April 2gth. After reviewing Mr. Pike's financial statements, she met with Mr. Pike again to help him

establish his retirement objectives. Mr. Pike wrote his objectives down and Fiona retained a copy for her files.

c) May 12th; After calculating the income Mr. Pike would need at retirement and several strategies to achieve the required level of savings, she met with Mr. Pike again to explain her recommendations.She gave Mr. Pike a copy of the recommended strategies that he had approved and Fiona kept a copy for her files.

d) May 13th to July 18th. Fiona telephoned Mr. Pike several times to ensure that he was implementing the strategies as agreed. She also reviewed the investments selected by an investment specialist whom she had recommended to Mr. Pike and determined that those investments were appropriate. All strategies were implemented as agreed. Gary weinrid Was born on January ne cerebrated his os blithaay this Year. Fe was born in istder ou he immigrated to Canada with his family when he was 12 years old. After ten full years of residency in this country, he moved back to Israel when he was 22 years of age only to return to Canada and settle here permanently at the age of 37.

Upon his return to Canada, Gary began working for Cygnus Corporation as a service technician where he worked for 12 years. After leaving Cygnus Corporation, he was hired by Dreamline Enterprises where he was employed for nine years. Gary retired at the age of 58 and has been enjoying his time at home for the past seven years.

Nancy was also born on January st, she is 60 years old. She has lived in Canada her entire life. Due to working on her PhD, Nancy entered the workforce at a relatively late age-she began working for the federal government at the age of 34. She completed 26 years of service before officially retiring effective today's date.

Gary and Nancy have been married for 13 years. This is Gary's second marriage following the death of his first wife. He has a 32-year old daughter named Charlene from his first marriage. Charlene is a single mother-her daughter Wendy will be celebrating her first birthday on May 7th of this year,

Registered Assets

In addition to contributions to his own RRSP, Gary has made annual contributions of $5,000 to Nancy's spousal RSP for the past several years. Gary intends to continue making these spousal contributions until and including the year Nancy has to deregister her RRSP. Nancy will not make any further contributions to her individual RRSP.

Gary and Nancy intend to wait until the latest possible year before transferring their respective RRSPs Into RRIFS.

Assets

Asset

Registered Assets:

RRSP

LIF

RRSP

Spousal RRSP

Ownership

Market

Value

Gary

Gary

Nancy

Nancy (annuitant);

Gary (contributor)

$443,000

79.000

$ 88.000

$ 91,000

Non-registered Assets:

$50,000 5-year, 4.85%

non-

redeemable

compound GIC maturing in

2 years

$75,000 5-year, 4.85% non-

redeemable

compound GIC maturing in

2 years

Gary

$ 57,634

Nancy

$ 86,450 Canadian and global equity mutual funds

Canadian bond fund

5,000 common shares of

Earthshine Corporation

Real Estate:

Principal residence

Rental property

Pension Assets

The source of

1) 141

Gary (contributor)

Gary

$ 57.634

Nancy

$ 86,450

Gary and Nancy as joint tenants

Nancy

Gary

$ 68,250

$ 96,133

112.112

Gary and Nancy as joint tenants

Gary and Nancy as joint tenants

The source of Gary's LIF assets is from his membership in a registered pension plan during his employment with Cygnus Corporation. Gary lives in a province that requires conversion of his LIF to a life annuity at age

80. His subsequent employer, Dreamline Enterprises, did not offer a pension plan.

Being a government employee, Nancy was a member of a contributory, defined benefit pension plan with a normal retirement age of 60. She joined the plan immediately upon being hired. The plan provides a retirement pension based on 2% per year of service of her average pensionable earnings for the last five years of service. Benefits are reduced by a CPP offset of 0.7% of the average YMPE for the last three years of service.

Nancy's pensionable earnings for the past five years and the YMPEs for the past three years are as follows:

Nancy's Average

Pensionable

Earnings

Year's Maximum

Pensionable

Earnings (YMPE)

5 vears ago

$47,850

$50,242

4 years ago

$52,755

$54,900

3 vears ago

Based on this information, Nancy's average pensionable earnings for her last five years of service with the federal government was $52,880.20 and her basic monthly pension at age 60 is $2,291.47.

Canada Pension Plan (CPP) and Old Age Security (OAS)

Gary's contributions to the CP started upon his return to Canada from Israel at age 37. Nancy made her first contribution to the CP once she was hired by the federal government at age 34. Neither Gary nor

Nancy has had any interruptions during their CP contributory period.

Gary started receiving his CP retirement pension when he was 63 years and 6 months old, Gary will receive his first AS benefit payment effective this month

Nancy will wait until age 65 before collecting her CP retirement benefits. At that time, she will be elligible for the maximum pension payable. Also, when her CP payments commence, based on an assignment ratio of 69.23%, the portion of her CP benefits that will be assignable will be $799.32; the portion of her CP benefits that will not be assignable will be $355.26.

Retirement Objectives

Gary and Nancy intend to lead a modest lifestyle during their retirement years. That being said, within the next five years, they will have one significant expense: they want to take a round-the- world trip. They estimate they will have to withdraw $50,000 from their savings to fund this trip.

Estate Obiectives

Gary wants to leave a before-tax amount of $25,000, in current dollars, in his RRIF as a charitable bequest to his church.

A major assumption in Gary and Nancy's retirement plan is that real estate values will continue to rise.

They are counting on their principal residence having a market value of $2.5 million at the time of their deaths. The property was purchased by Gary during his first marriage so, ultimately, he would like to see the house passed on to Charlene and his grandchild.

Assumptions

Gary and Nancy will live for another 26 years inclusive of this year.

Unless otherwise stated, Gary and Nancy are each assumed to be in a 36% combined marginal tax Unless otherwise stated, Gary and Nancy are each assumed to be in a 36% combined marginal tax bracket for the remainder of their lives

Inflation is expected to be an annual rate of 2.5%.

Investment returns for all investments are assumed to be 7%.

The OAS clawback threshold for this year is $77,580.

The maximum monthly AS benefit from this year forward will remain fixed at $601.45

The maximum monthly CP benefit from this year forward will remain fixed at $1,154.58.

The maximum monthly CP benefit 18 months ago was $1,134.17

YMPE: 3 years ago: $54,900; 2 years ago: $55,300; last year: $55,900

The net income threshold for enhanced Registered Education Savings Plan CESG payments will remain fixed at $91,831 from this year forward.

If Gary and Nancy apply for their respective OAS benefits at the earliest possible age, what statements) is correct? (For purposes of this question, ignore issues related to the clawback.)

i. Gary should apply for AS benefits under the old rules; Nancy should apply for OAS benefits under the new rules.

ii. Since Nancy has only 26 years of employment after age 18, she will be eligible for only 65% of the

maximum monthly AS benefit.

ili. Based on his residency in Canada, the maximum monthly AS benefit Gary can receive is

approximately 80% of the full benefit.

iv. Both Gary and Nancy should apply for OAS benefits under the new rules.

v. Gary should apply for AS benefits under the old rules; Nancy can apply for OAS benefits under either the new rules or the old rules.

O a) i only

O b) ii and iv

O c) i, il and ili

O d) ill and v