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The Oct 14 CII AF3 Exam – A Rollercoaster Ride to Make You Feel Shaky

The Oct 14 CII AF3 Exam – A Rollercoaster Ride to Make You Feel Shaky

Now that we have access to the CII AF3 exam paper for the October 2014, we take a look at what questions were posed of exam candidates and what were the common pitfalls – useful for those studying for AF3 exams.

Let’s make no bones about it – the CII’s AF papers are hard exams. If we look at the pass rates for each AF paper going back to 2007, then AF3 has the lowest with 40.95%. An average pass rate between 50-53% is where the majority of the AF papers sit.

So, AF3 is a hard exam. The two AF3 papers in 2014 had an average pass rate of 40.92% – so pretty much bang on the average pass rate for AF3. Out of the two papers however, I would suggest that the October paper was the harder, a fact backed up by anecdotal evidence from talking with those who sat it.

October’s AF3 paper can be found here.

We will now provide an overview of the paper to see why it caused so many people so much of a problem.

Question 1

The big 80-point case study – it would have been a difficult start for most candidates with a calculation focussing on PCLS being taken in stages with the added complication of primary protection.  Things then immediately got little better with a calculation focussing on taking benefits in stages with primary protection in place.

After a difficult start, the examiners eased up with a short question looking at charitable lump sum death benefits, only to then launch into a tricky carry forward question.  Then a straightforward ‘additional information’ question, followed by a difficult question on State pension death benefits.  The examiners must have by now been feeling sorry for the candidates by finishing off Question 1 with a relatively straightforward question (if you knew the rules!) on Individual Protection 2014, and a nice easy question on SSAS investment options.

All in all, not a nice start to the AF3 journey – more like being on a rollercoaster with the feeling at the end being one of feeling rather shaky. Some candidates would have gotten off the ride with a grin on their faces but they would have been in a distinct minority.

Question 2 and 3

Question 2 wasn’t too bad – the examiners clearly felt that putting candidates on another stomach churning ride so soon after the last one would have been cruel and unusual punishment. A nice easy opening dealing with escalation in payment and how benefits would change if the scheme was transferred into the PPF.

Having introduced candidates to the PPF gently, the examiners then upped the ante and started probing the PPF in more detail.  Just when candidates were starting to worry again, Question 2 finished off with an ‘Outline the factors’ question where there were plenty of opportunities to pick up marks.  After Question 2, most candidates must have felt that there was still a chance of passing, though the sick feeling would have remained for many.

Question 3 would make you or break you as a candidate in this exam – Question 1 was hard overall, Question 2 was okay (if you had studied the PPF and IP14), and Question 3 could have gone either way. It focussed on workplace pension reforms.  The first two questions weren’t overly challenging if you knew your stuff and gave your answers a bit of thought – the problem was that according to the examiners not everyone did. Even if the first two questions in Question 3 were outside your comfort zone, the last two questions should have offered a shot at redemption – additional information needed to advise on the client’s wish to transfer her stakeholder pension, and then a ‘State the factors’ that should be taken into account when deciding whether to invest a lumps um into a NISA or pension.  The problem with these last two questions however was that too many candidates didn’t tie their answers sufficiently to the case study scenario or were more interested in listing features that considering factors!

Previous Exams

Interestingly, if students had used the April 2014 paper and model answers as revision, they may have regretted wasting the time; none of it would have helped pass the October paper.

You can see this exam paper by clicking here.

Candidates sitting AF3 are expected to not only have a detailed knowledge of pensions from a technical perspective but also an in-depth understanding of the planning issues affecting clients faced with pension-related decisions. Hence as was the case with the October 2014 paper, there will be questions asking you to identify the additional information you would require to be able to advise the client with regards to their pension planning, and also asking you what factors you would need to consider when doing so.

Calculations will also feature to a significant extent as a means of testing your application of key concepts – in April 2014 there were 23 marks available for calculation questions, and in October 2014 there were 28 marks available. These will typically be around the annual allowance, PCLS, benefit crystallisation events and phased retirement.

Some parts of the syllabus will appear more often – and in more detail – than others:

  • Questions relating to State retirement benefits are ever present, but rarely account for more than a handful of marks.
  • With the topic of pensions regulation, the focus is most likely to be on pensions in the context of divorce, bankruptcy or the impact of the Pension Protection Fund on a transferred scheme.
  • A significant part of the exam is however based on drawdown or testing against the lifetime allowance either with or without transitional protection, and often with benefits being taken in stages over several years.
  • As this is the CII’s version of the qualification that has to be passed in order to be a pension transfer specialist, clearly, there will always be a considerable number of marks available in respect of pension transfer issues. These will typically be in relation to the process in calculating transfer values, the workings of TVASs and testing your understanding of Critical Yield in the context of pension transfers.  Though it could be a variation on this theme.
  • Topical themes and issues are also highly likely to be examined due to their particular relevance to the consumer. For example, workplace pension reform is an area of concern for both employers and employees and is an issue that is likely to be tested. An awareness of the changes related to defined contribution decumulation options is also required.

Common Pitfalls

Common pitfalls with this exam, as with many of the other AF exams, are that candidates do not answer the actual question being asked and even then not in enough detail.  It’s tempting of course to regurgitate all the information you know on the area being tested, but if this isn’t answering the exact question, you simply won’t get the points, and you will have wasted valuable time.  Having said that, if there are 10 points on offer, you need 10 bullet points to even have a chance of picking up good marks.  Talking of which, the student who can use bullet points to answer questions will save valuable time…and is also every examiner’s dream.  Better to be faced with 15 bullet points, 10 of which are good, than pages of prose where the examiner’s challenge is to find those 10 good points.


  • Read the question at least twice to make sure that you know exactly what is being asked before you even consider putting pen to paper.
  • Spend a few seconds considering the overall shape of your answer – what are the key points to be made? How does it tie back to the case study? How much detail should I go into given the marks available?
  • Make the answer relevant to both the question and the factors provided in the case study.
  • Try not to spend more than a minute on the question for each mark available – so ten marks equals ten minutes – much more and you will be reducing your time available to answer other questions that will require your attention later on in the exam.

Keep Up to Date

Keeping up to date is of course paramount for any good adviser – any changes in legislation are tested by the CII 3 months after they take effect.  It’s worth looking at the section on their website, which has the amendments to J05, R04 and AF3, to ensure you know when any changes will be tested. Using past papers is of course a really good way to prepare – but don’t limit it to just the last one – as already mentioned, April 2014 would not have helped for the following October.

Challenging but based on the syllabus

AF3 is a challenging exam.  However, it only tests the syllabus which means there should never be a left field curve ball question as can often be found in the AF5 paper.   This is a good thing – it means you can concentrate on studying the syllabus, and once you’ve done that, practise exam technique to use the time efficiently on exam day.  As with all the AF exams there are no shortcuts to success. The pass rates are clear evidence of that.

Grab the resources you need!

If you do want to improve your chances however, the use of mock questions and practice calculations will go a long way to doing that and help ensure that you are one of the 40.95% who pass the exam!

If you’re studying for your CII AF3 exam, and you’re losing sleep at night worrying about how you’ll do, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the AF3 mock exam taster now!

Click here to download our free taster mock paper for CII AF3

Over to You…

Do you plan to sit the AF3 exam? Are you feeling confident in your revision?