Our Post-Exam Review of the April 2022 CII R06 Exam
The exam guide from the April sitting of R06 has been released by the CII, prompting us to see how we did in predicting the questions and model answers in our pre-exam analysis.
You can access the exam guide here.
Case Study 1
Case Study 1 introduced us to Harry and Mia, both aged 61 and planning to retire in two years.
Their financial aims were to:
- ensure they had an adequate income in retirement
- review their investments and plan for the receipt of Mia’s inheritance
- consider an IHT mitigation strategy to ensure that their estate passes to their two children in a tax-efficient manner
Question Our Analysis
State the additional information that a financial adviser would need to obtain in relation to Harry and Mia’s pension arrangements, to enable them to advise on Harry and Mia’s retirement planning objectives. (12) Our analysis covered this in full - candidates should easily have scored almost maximum marks here. A great start!
State five benefits and five drawbacks of Harry retaining his executive pension plan (EPP). (10) Our analysis gave a table of benefits and drawbacks of transferring the EPP as well as the benefits and drawbacks of Harry’s accepting the guaranteed annuity rate. Within these model answers was all the information needed to score very well.
Explain to Mia how the portfolio of unit trusts that she is about to inherit would be taxed, if she decided to retain them as investments in her own name. (9) Again, our analysis provided all the information necessary to score the marks available.
Explain to Harry and Mia the process of establishing a suitable discounted gift trust and how such a trust could operate as part of their Inheritance Tax planning objective. (12) The information to answer this question to gain most of the marks available was within our generic technical section tailored to suit Harry and Mia’s circumstances.
Explain, in detail, how appropriate powers of attorney could be set up and how they would operate. (9) Identify any restrictions that apply to lasting powers of attorney (3) The first part of this question was covered in full although the restrictions were not.
Harry and Mia have expressed an interest in socially responsible investment. State the actions that a financial adviser should take regarding this interest when advising Harry and Mia on their investments. (5) We had included a number of different model question and answers on SRI and much of the model answer given by the CII could have been found within our analysis. As long as the candidate had read the question carefully and understood what was being asked of them, they should have picked up most of the marks available.
(i) State the drawbacks to Harry and Mia of retaining the current asset allocation in their stocks and shares ISA portfolios. (5)
(ii) Recommend and justify the actions that Harry and Mia could take to improve the tax efficiency of their existing financial arrangements. (12)
Within the analysis, we had commentary on the suitability of their investments which included the fact that all ISA holdings were in fixed interest and the drawbacks for this strategy. This was followed by a table of recommendations and justifications of how they could improve the tax efficiency of their investments.
Case Study 2
Onto case study two where we met an unmarried couple with two children, Matt and Emma, both aged 35.
Their financial aims were to:
- ensure their protection arrangements were both suitable and adequate for their needs
- improve their long-term savings arrangements
- improve the tax efficiency of their current arrangements
Question Our Analysis
Outline the key issues that a financial adviser should take into account when assisting Matt and Emma to prioritise their protection needs. (12) Our analysis provided all the detail necessary to gain very good marks on this question.
Recommend and justify why Matt and Emma should establish a family income benefit policy for their family protection needs. (12) At the end of our analysis we provide self-test questions – one of these was to recommend a suitable policy with the answer including family income benefit. Detail was also provided within our generic section.
(i) Explain to Matt and Emma how the proposed gift of the buy-to-let property would be treated for Inheritance Tax purposes. (7)
(ii) Outline the potential tax treatment for Income Tax and Capital Gains Tax purposes for Matt and Emma when they have assumed ownership of the buy-to-let property. (8)
We had included the IHT implications of the specific gift of the buy-to-let property from Emma’s father. We also had an example of a similar question that had been asked in a previous paper in our self-test section. Part (ii) tested the income tax and CGT treatment, and we had also included this in our analysis. All in all, candidates should have scored well in both parts of this question.
Explain to Matt and Emma the potential benefits for tax purposes if they decide to get married in the future. (6) This question we had not anticipated for Emma and Matt. Some of the benefits such as interspousal transfers for CGT purposes and using dividend allowances and PSAs were covered for Case Study 1 so we hope that candidates would have used this information as well as their own knowledge to gain some of the marks here.
(i) Identify and explain the key benefits for Matt and Emma of investing their regular pension contributions into equity-based funds. (10)
(ii)List the key risks associated with the investment in Matt’s global emerging markets fund. (5)
We had included analysis on the reasons why they should increase their regular pension contributions and part of this model answer was relevant to this question. Information on pound cost averaging was also included within the generic section. Part (ii) of this question was covered in full.
Explain to Matt and Emma why their capacity for loss may change following the transfer of the buy-to-let property from Emma’s father to them. (5) Within the analysis, we had a question on the factors that typically influence ATR/CFL; some of this could have been used to provide an answer.
Identify eight issues that a financial adviser should discuss with Matt and Emma at their next annual review. (8) Our review question was specifically about their investments, but these were also in the CII model answer, as well as the general review factors such as change in circumstances, income changes, regulation changes etc.
Overall, based on the information in both case studies, this paper did seem fair. Some new areas were tested, such as the tax benefits of being married but also the CII continues to, at times, consider the circumstances of, for example, the implications of parents making gifts. This is a reminder that future students should consider circumstances from all angles in order to be well prepared on examination day. We are confident that anyone using our analysis would have achieved a pass in this paper.
Grab the resources you need!
If you’re studying for your CII R06 exam, and you’re wanting to feel more confident on exam day, grab our free taster analysis to try out one of Brand Financial Training’s resources for yourself. Click the link to download the R06 case study analysis taster now!