CII AF7 Pension Transfers – A Review of the October 2017 Exam Paper

We have been reviewing the CII exam papers from October, and this week, it’s the turn of the first ever AF7 Pension Transfer exam.

If you haven’t seen it yet, then the paper can be found here.

Favourable Feedback from Candidates

Most of the feedback we’ve received from those who sat this paper has been favourable, with most saying that it seemed like a fair paper.  For those studying for it, there was only one exemplar guide to help, but it seemed to be a good guide as to what to expect on the day.

Two hours are allowed for the paper, and the exam is split like the other AF exams into a Section A and a Section B.

Section A

The first section is comprised of four questions with a total of 38 marks available.   Question 1 started with suitability report requirements and how the FCA expects an insistent client to be dealt with.  Question 2 was on how a CETV is calculated and how the assumptions used to work out the critical yield in a TVAS differ from those used to work out a CETV.  Question 3 was on employer covenants and Question 4 covered a client who had been a member of an EPP since 1979.

Other than employer covenants, which a CII student may not have come across in previous pension exams, these seem to be straightforward questions for anyone working in pension transfers.

Section B

Section B is made up of two case studies, but the good news is that they are nowhere near as detailed as other AF case study equivalents such as AF3 and AF1.

Case Study 1

The first case study involved a divorced woman Lizzie, with two children, who now lives with her partner Jo.  Jo is financially secure so Lizzie wants her children to benefit from any death benefits.  The relevant details regarding her deferred DB scheme were given in the format familiar to AF3 students.

Questions 5 – 8 then tested various aspects of a potential transfer, including 8 marks for fact finding and 8 marks for explaining the factors an adviser should consider. So far so good! Six marks were then on offer for explaining the limitations of the critical yield produced by the TVAS, and finally 10 marks were split between the options available to the children in the event of Lizzie’s death before 75 and an explanation of why a nomination form doesn’t guarantee the children would receive the death benefits.

Case Study 2

The second case study concerned a couple where the husband was over 60, and his wife was almost 20 years younger.  They also had two children.  The first question involved listing 6 benefits and 6 drawbacks of the husband transferring his DB scheme to a personal pension.  The next question was on why he couldn’t use the transitional reliefs currently available for 7 marks.  There were then 6 marks for explaining what the ‘safe withdrawal rate’ is and finally 6 more marks for a question on stress testing as part of a review.

It will be interesting to see what the pass rate was like on this exam, as it seems like a good paper to us.

Tips for Preparing for the AF7 Exam

For anyone contemplating the exam, study the exemplar guide thoroughly and also the examiner’s comments on this first exam paper from October when they become available.  A review question pops up in each, and the exam will surely always be testing the pros and cons of transferring from a DB scheme. The key to success will be in making sure the answers given relate exactly to the case study rather than a generic answer prepared at home.   Despite what we’ve said about the apparently straightforward questions, it is still an advanced paper, and the examiner’s comments on a lot of the AF papers usually include the fact that students do not relate their answers to the case study.

One other thing to watch out for, particularly those used to sitting AF papers, is that this exam is only 2 hours long rather than the usual 3 hours, so students need to make sure they keep an eye on the clock.

Grab the resources you need!

If you’re studying for your CII AF7 exam, and you’re wanting to feel confident on exam day, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF7 mock paper taster now!