Free CII R06 Vignette Practice: Financial Planning Cases

Use this free CII R06 vignette practice page as a quick style check before you continue with Finance Prep interactive practice. These are original Finance Prep practice vignettes, not official CII questions, copied live-exam content, or exam dumps.

Free CII R06 vignette practice

Work through the sample vignettes first. Then review the explanations and decide whether the error was a missed fact, a technical rule, or a suitability judgement.

Practice Vignette 1: Client Situation Analysis and Option Evaluation

Anita Lewis, aged 61, is a widow living in Bristol with her long-term partner, Tom, aged 64. They are not married or civil partners. Tom moved into Anita’s home eight years ago after selling his own flat and now contributes £700 per month towards household costs. Anita wants Tom to be able to remain in the home if she dies first, but she ultimately wants her estate to benefit her two adult children, Daniel and Priya.

Daniel, aged 35, runs a small building business and is going through a divorce. Priya, aged 31, has a learning disability, receives means-tested benefits and PIP, and is not comfortable managing large sums. Anita’s late husband, Raj, died in 2020 and left his whole estate to Anita. Anita has not remarried. Her current will was written shortly after Raj’s death. It leaves £100,000 to Tom and the residue equally to Daniel and Priya. It contains no trust wording and no right for Tom to remain in the property.

Anita is in good health and earns £96,000 per year as an NHS consultant. She plans to retire at 65. After normal expenditure, pension contributions and holidays, she expects to have surplus income of about £18,000 per year. She is cautious about giving away control of her home but is open to regular gifts if they do not affect her lifestyle.

Her current assets are:

For initial planning, assume the SIPP is outside Anita’s estate for IHT purposes, no lifetime gifts have been made, funeral and administration costs are ignored, and Raj’s nil-rate band and residence nil-rate band were unused. The 2025/2026 nil-rate band is £325,000 and the residence nil-rate band is £175,000 per person, with tapering at £1 lost for every £2 of estate value above £2 million.

Question 1

What is the most significant estate-planning weakness in Anita’s current arrangements?

• A. Her current will does not adequately deal with Tom’s housing need or Priya’s vulnerability, and it may create avoidable family provision and benefit-management issues.
• B. Her main concern is that Raj’s unused nil-rate bands were lost when he left everything to Anita.
• C. Her SIPP nominations mean the pension must be included in her taxable estate and divided under the will.
• D. Her estate will pass under the intestacy rules because she has started living with Tom since making the will.

Best answer: A

Explanation: The key issue is not just the IHT number. Anita’s will fails to reflect her current personal circumstances: Tom is a financially involved cohabiting partner with a housing need, while Priya may lose means-tested benefits or be unable to manage a large outright inheritance. Estate planning should align the will, any trusts, pension nominations and life assurance with the client’s family provision objectives.

Question 2

Based on the stated assumptions, what is Anita’s approximate IHT liability if she dies now and the current will remains in place?

• A. £532,000
• B. £628,000
• C. £488,000
• D. £820,000

Best answer: A

Explanation: Anita’s taxable estate for this calculation is £950,000 + £720,000 + £350,000 + £200,000 = £2.22 million. The combined nil-rate bands are £650,000. The combined residence nil-rate bands start at £350,000 but are tapered by £110,000 because the estate exceeds £2 million by £220,000. Total allowances are therefore £890,000, leaving £1.33 million chargeable at 40%, giving £532,000.

Question 3

Which will-planning approach is most suitable for Priya’s expected inheritance?

• A. Use an appropriate disabled person’s trust or discretionary trust with carefully chosen trustees and a letter of wishes.
• B. Leave Priya’s share to Tom so he can decide how much she should receive later.
• C. Exclude Priya from the will and rely on Daniel to support her informally after Anita’s death.
• D. Leave Priya’s share outright because direct inheritance is always simpler and more tax-efficient than using a trust.

Best answer: A

Explanation: For a vulnerable adult beneficiary, the estate-planning objective is often controlled support rather than a simple outright gift. A suitable trust can allow trustees to apply funds for Priya’s benefit, manage investment and distribution decisions, and reduce the risk of disrupting means-tested benefits. Specialist legal drafting is essential because the trust terms and Priya’s circumstances determine the tax and benefit treatment.

Question 4

Anita wants to start reducing future IHT without giving away her home or reducing her standard of living. What should the adviser prioritise?

• A. Make a single large cash gift now and assume it is fully outside the estate after three years.
• B. Cancel the life assurance because the proceeds increase the IHT bill by the full policy value.
• C. Transfer the main residence to Daniel and Priya immediately while continuing to live there rent-free.
• D. Establish a documented pattern of regular gifts from surplus income and keep annual evidence that they are affordable from income after normal expenditure.

Best answer: D

Explanation: The normal expenditure out of income exemption can be valuable where a client has genuine surplus income, makes gifts as part of a settled pattern, and can maintain their usual standard of living. Anita’s surplus income and reluctance to give away her home make this a natural first planning area, provided records are kept and affordability is reviewed.

Practice Vignette 2: Synthesis of Client Information and Planning Assumptions

Northbridge Financial Planning is preparing a suitability report for Daniel Shah, age 57, and Rupa Shah, age 55, who are married and live in England. The review is in February 2026 and the file is being checked before the adviser finalises planning assumptions.

Daniel earns £112,000 as an operations director, with a discretionary bonus that has varied from £8,000 to £22,000. Rupa is a self-employed architect whose recent taxable profits have ranged from £38,000 to £62,000. Their children, Anika and Milan, are financially independent.

They say their main aims are to retire together when Daniel is 61 and Rupa is 60, give Anika £50,000 towards a house deposit within 18 months, keep at least six months’ expenditure in cash, and ensure family protection and estate documents reflect their current wishes. They want retirement spending of about £4,800 per month after tax, excluding any mortgage payments. Daniel says, ‘We must be mortgage-free before I stop work.’ Rupa adds, ‘I do not want us using pension tax-free cash just to clear debt.’

The mortgage statement shows an interest-only mortgage of £176,000, due in May 2033 when Daniel will be 65. An old planning note from 2021 says the intended repayment source was Daniel’s pension commencement lump sum at age 65. No other mortgage repayment vehicle is recorded.

The fact-find shows personal cash savings of £95,000 and Rupa’s business current account of £28,000. Daniel describes the cash as available for Anika’s gift and an emergency fund, but Rupa says most of it must be retained for tax, VAT, and business costs. The fact-find also records a household surplus of £1,200 per month. Recent bank statements show monthly transfers of £700 to Daniel’s mother labelled ‘care top-up’, £350 to Rupa’s studio landlord labelled ‘arrears’, and holiday costs averaging £600 per month over the last year; none of these appear in the expenditure schedule.

Daniel’s workplace pension is valued at £360,000 and is invested 85% in equities in the provider’s adventurous default lifestyle strategy. Rupa’s stocks and shares ISA is valued at £146,000 and includes UK equity income funds plus two legacy oil and mining holdings inherited from her father. Their risk questionnaire outcome is cautious, scored 3 out of 10, and both say they would be uncomfortable with a fall of more than about 5%. Rupa also says sustainable investment is important and that she wants to avoid fossil fuels and weapons.

Daniel has death-in-service cover of four times salary and a workplace pension expression of wish dated 2011 naming his sister, Leanne, as 100% beneficiary, with the note ‘guardian for children’. Their wills were signed in 2006, appoint Leanne as guardian, and leave the estate to the surviving spouse, then equally to the children. At the meeting Daniel says, ‘Rupa should be looked after first, then the children. Leanne does not need to be involved now.’ Rupa says Anika should receive £50,000 directly if Rupa dies.

Question 1

Which clarification question would best resolve the inconsistency in Daniel and Rupa’s retirement objective?

• A. Would you prefer the mortgage to be on a fixed rate or a variable rate when the current product ends?
• B. You want to retire at 61 and 60 with no mortgage, but the interest-only loan runs to Daniel’s age 65 and the old note used pension cash; what specific source and timing do you now intend for repaying the £176,000 mortgage?
• C. Should the retirement projection assume investment growth of 4% or 5% each year before charges?
• D. Would Anika be willing to delay receiving the house deposit gift until after Daniel has retired?

Best answer: B

Explanation: The key inconsistency is that the clients want to retire before Daniel is 65 with no mortgage, yet the mortgage is interest-only, matures at Daniel’s age 65, and the previous repayment plan relied on pension cash they now say they do not want to use. The best clarification question asks for the intended repayment source and date before any retirement modelling is treated as reliable.

Question 2

The adviser wants to verify whether Daniel and Rupa genuinely have a monthly surplus. Which clarification question best resolves the inconsistency?

• A. Would you like the cash savings moved to an account paying a higher rate of interest?
• B. Are the payments to Daniel’s mother, Rupa’s studio landlord, and the recurring holiday costs ongoing commitments, and should they be included in normal household expenditure?
• C. Do you normally pay credit card balances in full at the end of each month?
• D. Would Rupa prefer to pay estimated tax through a separate business savings account?

Best answer: B

Explanation: A surplus figure is only useful if it reflects real ongoing cash flow. The bank statements show material payments that are not in the expenditure schedule, so the adviser should clarify whether they are recurring commitments, temporary payments, or misclassified business costs before relying on the surplus for gifting, saving, or retirement planning.

Question 3

Which clarification question best resolves the inconsistency in Daniel and Rupa’s investment information?

• A. Would you like the ISA income distributions paid out or automatically reinvested?
• B. Would you prefer Daniel’s pension to be held on the platform with the lowest annual charge?
• C. Do the current adventurous pension and equity-heavy ISA holdings reflect informed choices you still want to retain, or are they default or legacy holdings that should be reviewed against your cautious risk score and sustainable preferences?
• D. Should the portfolio benchmark be based on UK equities or global equities?

Best answer: C

Explanation: A client’s risk profile is not established by a questionnaire score alone; it must be reconciled with current holdings, capacity for loss, knowledge and experience, time horizon, and preferences. Here, adventurous and equity-heavy holdings conflict with a cautious score, a stated 5% loss discomfort, and Rupa’s sustainability concerns, so the adviser must clarify whether the holdings are intentional or merely inherited/default positions.

Question 4

Which clarification question would best resolve the inconsistency in the protection and estate-planning information?

• A. Would Daniel like to increase his death-in-service cover above four times salary?
• B. Should Leanne be asked to confirm whether she is willing to receive Daniel’s pension benefits?
• C. Do you still want Leanne to be named on Daniel’s death-benefit nomination and in the wills, or should the nominations and estate documents be updated to reflect Rupa first and then the children, including any direct gift to Anika?
• D. Would you prefer a simple funeral plan or a prepaid funeral plan?

Best answer: C

Explanation: Protection and estate-planning assumptions should reflect current wishes, family circumstances, and up-to-date documents. Daniel’s nomination still names his sister as 100% beneficiary for a guardianship role that appears obsolete, while the clients now refer to Rupa, the children, and a possible direct gift to Anika; this must be clarified before implementation recommendations are made.

Practice Vignette 3: Suitable Plans, Recommendations, and Justification

Sarah Khan, age 46, and Omar Khan, age 44, are married and live in England with their two children, aged 14 and 10. They have asked for advice after Sarah received a £110,000 inheritance, currently held in an easy-access savings account. They want to improve their financial resilience, make better use of surplus income, and remain on track to retire around age 60 if affordable.

Sarah is a marketing director earning £82,000 a year. She is a member of her employer’s defined contribution pension scheme using salary sacrifice. She currently contributes 4% of salary and her employer contributes 6%. The employer will match Sarah’s contributions pound for pound up to 8% of salary. Sarah’s pension fund is worth £118,000 and is invested in the scheme default fund.

Omar is a self-employed IT consultant. His net profits were £42,000 last year but have varied between £32,000 and £55,000 over the last four years. He has no employer sick pay, no income protection, and a small SIPP worth £34,000. His work is their second main source of household income.

Their home is worth approximately £620,000. They have a £285,000 repayment mortgage with 18 years remaining and a fixed rate until 2028. The mortgage payment is £1,560 per month. They also have a credit card balance of £9,500 at 21.9% APR, with no early repayment penalty. They have been making slightly more than the minimum payment.

Their essential household expenditure is about £4,700 per month, excluding discretionary spending of around £1,250 per month. Their current cash reserve, before using the inheritance, is £12,000. In a typical month they have surplus income of about £1,300, although this falls sharply when Omar’s contracts are between renewals.

They have a joint-life decreasing term assurance policy matching the mortgage. Sarah also has death-in-service cover of four times salary and group income protection after 26 weeks. Omar has £100,000 of level term assurance written in trust until age 60. Both clients describe themselves as medium-risk investors and say they would prefer sustainable investment options if the portfolio remains suitably diversified. They are open to using pensions, ISAs, and general investment accounts, but they do not want the inheritance invested until their short-term financial weaknesses have been addressed.

Question 1

The adviser recommends that Sarah and Omar repay the credit card balance from the inheritance before investing any of the remaining lump sum. Which client fact most strongly supports this recommendation?

• A. Their mortgage is fixed until 2028.
• B. They prefer sustainable investment options.
• C. The credit card balance is £9,500 at 21.9% APR and can be repaid without penalty.
• D. They describe themselves as medium-risk investors.

Best answer: C

Explanation: A recommendation should be justified by the fact that most directly links the client’s circumstances to the proposed action. Repaying a 21.9% APR credit card produces a certain saving and removes expensive unsecured debt before market-risk investments are considered.

Question 2

The adviser recommends retaining about six months of essential expenditure in cash before investing the rest of the inheritance. Which client fact most strongly supports this recommendation?

• A. They have a typical monthly surplus of about £1,300.
• B. Their home is worth approximately £620,000.
• C. They have a fixed-rate mortgage until 2028.
• D. Their current cash reserve is £12,000, while essential expenditure is about £4,700 per month and Omar’s income is variable.

Best answer: D

Explanation: Emergency-fund recommendations should reflect essential expenditure, income security, and access to liquid assets. Here, a larger cash reserve is supported by the combination of low existing cash cover and Omar’s variable self-employed income.

Question 3

The adviser recommends that Sarah increases her salary-sacrifice pension contribution from 4% to 8% of salary before making further taxable investments. Which client fact most strongly supports the specific 8% contribution level?

• A. Her pension fund is invested in the scheme default fund.
• B. Sarah earns £82,000 a year.
• C. They would like to retire around age 60 if affordable.
• D. Her employer will match Sarah’s contributions pound for pound up to 8% of salary.

Best answer: D

Explanation: When justifying a pension contribution recommendation, the strongest fact is often the one that creates a clear financial advantage. Increasing Sarah’s contribution to 8% secures the full available employer match, which is a direct and measurable benefit before considering other investments.

Question 4

The adviser recommends prioritising an income protection policy for Omar. Which client fact most strongly supports this recommendation?

• A. Omar is self-employed, has no employer sick pay or income protection, and his income helps meet essential household expenditure.
• B. Sarah has death-in-service cover of four times salary.
• C. They have a joint-life decreasing term policy matching the mortgage.
• D. Omar has £100,000 of level term assurance written in trust.

Best answer: A

Explanation: Income protection is justified where earned income is important to the household and there is no adequate replacement income if illness or injury prevents work. Omar’s self-employed status and lack of sick-pay benefits make the protection gap especially clear.

Practice Vignette 4: Implementation, Review, Maintenance, and Adaptation

Amira and Lewis Patel are married and live in England. They meet their financial planner on 15 February 2026 after Amira is told that her employed role will end on 31 March 2026. Lewis will remain employed.

Their stated priorities are to clear expensive debt, keep enough accessible cash during Amira’s transition to consultancy work, reduce avoidable tax on Amira’s redundancy year, maintain protection, and invest sustainably where this does not create unsuitable risk.

The mortgage has an early repayment charge of 1.5% on lump-sum overpayments above the permitted allowance until 30 June 2026. The current monthly mortgage payment is £1,050; the planner estimates a comparable replacement product could cost about £1,450 per month if rates remain unchanged.

Amira’s expected taxable income for 2025/2026 is about £127,000 before any personal pension contribution. Her workplace pension is worth £260,000 and she has not accessed it. The planner has confirmed that Amira has enough relevant UK earnings, annual allowance, and carry-forward capacity to make up to a £45,000 gross personal pension contribution before 5 April 2026 without exceeding the annual allowance. Lewis has a personal pension worth £88,000. Neither client has used their 2025/2026 ISA allowance of £20,000 or their 2025/2026 CGT annual exempt amount of £3,000.

Amira also holds a general investment account worth £92,000 in her sole name with an unrealised gain of £18,000. The current holding is a UK equity income fund, which no longer matches the couple’s medium risk profile or Amira’s preference to avoid tobacco and fossil-fuel exposure. Lewis is a basic-rate taxpayer. The couple want to contribute £20,000 to their daughter’s wedding in September 2026.

Amira’s death-in-service cover and employer income protection will cease when her employment ends. Lewis has £150,000 level term assurance to June 2031. Amira has recently been diagnosed with well-controlled type 2 diabetes, and the planner has warned that underwriting for new protection could take up to eight weeks.

Question 1

Assuming Amira receives the redundancy payment on 31 March as expected, which implementation sequence is most appropriate for tax efficiency and affordability before 5 April 2026?

• A. Make the maximum £45,000 gross pension contribution immediately from current cash before checking redundancy receipt or short-term spending needs.
• B. Crystallise part of Amira’s pension before 5 April to create cash for further pension contributions and then repay the credit card later.
• C. Use the available cash first to maximise both ISA allowances, then consider Amira’s pension contribution after 6 April once her employment has ended.
• D. Prepare the pension paperwork now, confirm the post-redundancy cash position, clear the credit card and reserve essential cash, then pay only an affordable gross pension contribution before 5 April.

Best answer: D

Explanation: Implementation order matters because Amira has a short tax-year window and a simultaneous liquidity risk. The planner should prepare in advance, then use the redundancy cash to remove high-interest debt and preserve the agreed emergency and near-term wedding funds before committing an affordable pension contribution by 5 April 2026. The pension contribution is more time-sensitive than ISA funding because it can reduce tax on Amira’s unusually high 2025/2026 taxable income.

Question 2

Which protection-related implementation step should the planner prioritise before Amira’s employment ends?

• A. Start replacement protection underwriting immediately, disclose Amira’s diabetes and employment change, and treat the gap as closed only when acceptable cover is on risk.
• B. Wait until Amira has secured consultancy contracts, because protection underwriting will be simpler once her new income is known.
• C. Rely on the redundancy payment as temporary protection and revisit insurance only at the annual review.
• D. Cancel Lewis’s existing term assurance now to improve short-term affordability while Amira’s new cover is being arranged.

Best answer: A

Explanation: Protection sequencing should avoid uninsured gaps. Amira’s employer benefits stop at a known date and underwriting may take several weeks because of her recent diagnosis. A good customer outcome is more likely if applications and disclosures start promptly, existing individual cover is retained, and any recommendation is treated as implemented only when the policy is accepted and on risk.

Question 3

The couple ask whether they should immediately overpay £40,000 on the mortgage, fund investments, and repay debt. Which sequence best manages affordability and avoidable cost?

• A. Pay the daughter’s wedding contribution immediately, then use any remaining cash for mortgage overpayment and leave the credit card until after 30 June.
• B. Make the £40,000 mortgage overpayment now because the mortgage balance is the largest liability, then repay the credit card from future consultancy income.
• C. Repay the credit card first, retain the emergency reserve and wedding money, review the mortgage when the early repayment charge ends, and invest only surplus funds afterwards.
• D. Invest the £40,000 immediately because long-term market returns are likely to exceed the current fixed mortgage rate.

Best answer: C

Explanation: The implementation sequence should reflect cost, liquidity, and certainty. The credit card has the highest guaranteed cost, the emergency reserve and wedding commitment are near-term cash needs, and the mortgage has a known early repayment charge until 30 June. Long-term investment should follow, not precede, resolution of expensive debt and short-term affordability risks.

Question 4

What is the most suitable sequence for implementing the proposed move from Amira’s general investment account into sustainable investments and ISAs?

• A. Sell the whole general investment account immediately before 5 April so the proceeds can be reinvested in sustainable funds as quickly as possible.
• B. Switch the holding within Amira’s general investment account first, then decide later whether ISA subscriptions or a transfer to Lewis would have been better.
• C. Transfer the entire investment to Lewis without further discussion because he is a basic-rate taxpayer and will always pay less tax on gains.
• D. Update risk, capacity for loss, sustainable preferences, charges and tax estimates; consider inter-spouse transfer and phased disposals; then place trades after suitability is agreed.

Best answer: D

Explanation: Investment implementation should not begin with a trade instruction. The planner should confirm the clients’ updated risk profile, capacity for loss, sustainable preferences, charges, and tax consequences, then consider whether spouse transfer, use of both CGT annual exempt amounts, ISA subscriptions, and phased disposals improve the outcome. Only after suitability and consent are documented should the trades be placed.

Practice Vignette 5: Client Information, Needs, Values, and Risk Profile

Priya Morgan, age 55, and Daniel Morgan, age 57, are married and live in England. They are meeting their financial adviser for a planning review in the 2025/2026 tax year. Priya is a finance director at Novara Systems plc, a listed technology company, earning £95,000 a year plus a variable bonus and share awards. Daniel is a self-employed graphic designer with average drawings of £38,000 a year. They describe themselves as willing to take investment risk for long-term goals, but they do not want their essential lifestyle to depend on one uncertain outcome. Their home is worth about £520,000 and they have a £130,000 tracker mortgage, charged at Bank of England base rate plus 0.90%, with nine years remaining. Mortgage payments have increased materially over the last two years, reducing their monthly surplus to about £600. They hold £22,000 in an instant-access savings account and a separate £40,000 cash deposit intended as a house-deposit gift for their daughter in 18 months. Priya has a defined contribution pension worth £420,000, and Daniel has a SIPP worth £160,000. Both pensions are invested mainly in global multi-asset growth funds. They would like to retire gradually from around age 62 and draw about £32,000 a year net from their pensions and savings, in addition to any later State Pension entitlement. Daniel is particularly concerned about what would happen if investment markets fell sharply just after they started pension withdrawals. Priya also holds £210,000 of Novara Systems shares from employer awards. She is reluctant to sell because she knows the company well and believes the share price will recover after a recent fall. The adviser notes that Priya’s salary, bonus, future share awards, pension contributions, and a significant part of the couple’s investable wealth are all linked to the same employer. Priya and Daniel also worry that a fixed retirement income may not keep pace with household bills, travel costs, and possible later-life care costs over a retirement that could last 30 years. The adviser wants to explain the different financial risk types separately so that each recommendation can be linked to the most relevant client concern rather than using the word risk too generally.

Question 1

Priya asks why the adviser is uneasy about the Novara Systems shareholding when she understands the company well. Which explanation best describes the financial risk most relevant to this point?

• A. Reinvestment risk: future dividends may have to be reinvested at lower yields than are available today.
• B. Concentration risk: too much of Priya’s wealth and employment income depends on one company, so a company-specific setback could affect several parts of their plan at once.
• C. Liquidity risk: listed employer shares cannot normally be sold quickly enough to meet short-term cash needs.
• D. Currency risk: overseas exchange-rate movements could reduce the sterling value of their assets.

Best answer: B

Explanation: Concentration risk is the risk that a client has too much exposure to one asset, sector, employer, or source of income. Priya’s familiarity with Novara does not remove the risk that an adverse company event could reduce her employment income and investment wealth at the same time.

Question 2

Daniel is worried about taking pension withdrawals if investment markets fall sharply in the first few years of retirement. Which risk type should the adviser explain as most relevant?

• A. Longevity risk: the clients may live longer than expected and need income for more years.
• B. Credit risk: the pension fund provider may default on its debt obligations.
• C. Sequencing risk: poor investment returns early in drawdown can have a disproportionate effect because withdrawals are being taken while the portfolio is depressed.
• D. Inflation risk: rising prices may reduce the purchasing power of a fixed income.

Best answer: C

Explanation: Sequencing risk is especially important when clients move from accumulation to decumulation. The same average long-term return can produce very different outcomes depending on whether poor returns occur before or after withdrawals start.

Question 3

Priya and Daniel are concerned that a fixed retirement income may not cover household bills and possible care costs over a 30-year retirement. Which explanation best addresses the relevant financial risk?

• A. Interest-rate risk: changes in base rates may alter the capital value of their fixed-interest investments.
• B. Inflation risk: prices may rise over time, so a fixed income could buy less in later retirement than it buys at the start.
• C. Concentration risk: too much of their retirement income may come from one company or one investment.
• D. Mortality risk: one client may die earlier than expected, reducing household income.

Best answer: B

Explanation: Inflation risk is the risk that rising prices erode the real value of income and capital. For retirees, it is particularly relevant where spending needs may last for decades and may include costs, such as care, that could rise faster than general prices.

Question 4

The Morgans’ tracker mortgage payments have risen, reducing their monthly surplus. Which risk type is most directly affecting their budget resilience?

• A. Longevity risk: the mortgage term may continue longer than their expected lifetime.
• B. Interest-rate risk: because the mortgage tracks base rate, higher rates can increase payments and reduce disposable income.
• C. Market risk: stock market volatility is causing the mortgage payment to change.
• D. Liquidity risk: they cannot access any cash quickly enough to pay the mortgage.

Best answer: B

Explanation: Interest-rate risk is the risk that changes in rates affect borrowing costs or investment values. For a tracker mortgage, the link is direct: if base rate rises, repayments can rise and the clients’ capacity to save, invest, or absorb shocks may fall.