Our Post-Exam Review of the July 2020 CII R06 Exam

The R06 exam paper from the July sitting has been released by the CII prompting us to see how we did in our pre-exam analysis.  

You can access the exam guide here.

Case Study 1

Case Study 1 concerned Seth and his wife Kaitlyn, in their sixties, recently married.

Their first financial aim was to:

Obtain an adequate income in retirement

The first three questions focused on this aim. Firstly, candidates were asked to state the extra information needed to recommend a strategy to ensure the couple could receive an adequate retirement income. Within our analysis, we give as many fact-finding model answers as we can, so we had this question covered off straight away with enough information for the 10 marks on offer.

The second question specifically covered the fact that Kaitlyn had deferred her State pension, with the question asking what the benefits were of her doing this, as well as the factors that Seth should consider before deciding whether to defer his State pension.  This question was for 8 marks in total, and our analysis covered various aspects – firstly, the benefits of Kaitlyn having deferred her pension, why she should consider drawing it now, and also we explained Seth’s entitlement to State pension.  Overall, candidates should have had enough information to tackle this question well.

The third pensions-related question asked for an explanation of how Seth is affected by the Lifetime Allowance and the factors he should consider in relation to this position prior to his retiring. This question was for 7 marks, and again we had provided the necessary information.

Their second financial aim was to:

Ensure that their current investment holdings are suitable and tax-efficient.

There were two questions on this aim: one we had seen coming, one we, unfortunately, hadn’t.  Question (e) asked for the benefits and drawbacks for Seth of encashing his offshore bond and investing the proceeds into a range of unit trusts.  This question was for 10 marks, and we had covered the scenario of Seth’s being unsure whether the bond meets his needs and the factors that need to be considered to recommend if this is still a suitable product for him.

Question (f) asked for the benefits and drawbacks for them both of investing in an EIS.  This has been asked before, so we hope that candidates would have had some knowledge up their sleeves to gain most of the marks on offer, as we hadn’t given the information in this particular exam analysis.

The final aim was to:

Ensure that their estate can be passed as tax-efficiently as possible to their children.

Question (d) (i) and (ii) covered this aim, and candidates were asked to state how Seth’s estate would be dealt with and distributed should he die in the near future, and part (ii) asked for the recommended actions they could take now to ensure they each reduce the IHT on their deaths whilst ensuring that their respective assets pass to their children.  The question in total carried 20 marks: 8 for part (i) and 12 for part (ii).  Our analysis covered that their first spouses had both died and left them their entire estate and what the impact of this would be on their IHT liability. We also had a model answer on the how their wills can be used to ensure assets are passed to their respective children as tax-efficiently as possible, as well as various recommendations of how certain products could help mitigate their IHT liabilities. All in all, candidates should have had all the information to pick up most, if not all, the available marks. 

The final question was the review question and candidates had to state the factors that an adviser should take into account when reviewing Seth and Kaitlyn’s investments at their next annual review meeting.   We always include a model answer for a review question, and our answer could have been adapted to suit this scenario for the 8 marks available.

Case Study 2

Onto Case Study 2 and this involved Mita and Harish – both in their fifties with two teenage children.

Their first aim was to:

Ensure their existing pension arrangements are on target to meet their retirement aims.

The second part of the exam also included two questions on pensions.  Candidates firstly had to identify the key issues that an adviser should consider in relation to their existing pension arrangements when assessing their suitability.  They also had to state the benefits of their increasing their existing pension contributions as well as an explanation of why the investments held in Harish’s SIPP may be unsuitable for his long-term retirement planning objectives.

Our analysis covered various aspects of pensions: fact-finding, which uncovered many of their issues; the process of ensuring they have sufficient funds; how to work out if Harish would be subject to the tapered annual allowance; as well as the impact of making further employer contributions. We also included a table of why they should increase their pension contributions and a model answer on the assets held in Harish’s SIPP, including reasons why they might not be suitable.

Their second aim was to:

Repay Harish’s buy-to-let-mortgage before he retires.

Question (e) covered this aim. Candidates were asked to state the benefits and drawbacks for Harish of using the joint deposit savings to repay his mortgage. Our analysis included a model answer which gave the implications of using his savings to do just that, which we trust candidates could have used to pick up the marks for this question.

Their third aim was to:

Build up funds to help the children with future university fees and to repay any student loans.

Question (f) covered this objective. Candidates were asked to outline the reasons why they should consider investing on a monthly basis into an OEIC to build up funds to repay any student loans that their children may take.  We had this question covered with a model answer, which included the advantages of their making regular contributions to an investment in order to build up funds for their children.

Their last aim was to:

Ensure Harish can manage his mother’s financial affairs.

The last question covered this aim. Candidates had to explain how the EPA, that Harish holds for his mother, operates and how this can be used to manage her affairs both now and in the future if she were to lose her mental capacity. We are happy to say that this question was also covered in our analysis. 

There was one question that can be considered the curveball of the paper, where we were given new information regarding Harish, which was that he had been considering protection. Candidates had to state the reasons why income protection may be more suitable for him than critical illness.  This was not hinted at in the case study, so candidates may have been blind-sided. However, there is information on income protection and critical illness included in the generic section of the analysis, so this would have been useful to construct an answer, as well as candidates using their own previous knowledge and experience of course.  Curveball questions can appear in the R06 paper but do not normally carry too many marks; in this paper, this question was for just 6 marks. 

Finally, we had a question again not specifically related to the aims but on a product that was mentioned in the case study, which was regarding Mita’s Share Incentive Plan. Candidates had to state how a SIP operates and the options available to her when it matures.  We had this question covered off with the main features of a SIP, as well as the tax position when her plan matures if she decides to sell them, or the implications of her transferring them to an ISA. 

All in all, another successful pre-analysis of the R06 exam, where we can feel confident that anyone using our analysis to help in their preparation would have had an excellent chance of passing.

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!