The CII J05 April 2018 Exam in Review

In this article, we discuss the questions set in the April 2018 exam paper for CII J05 – Pension Income Options.  This will be useful for you if you are preparing to sit J05; it will help you to focus your revision on the areas that are likely to be examined.

You can find a copy of the April paper here.

Two hours are given to answer 15 short-answer questions for a total of 130 marks; a pass gives students 20 Diploma credits.  In our experience of analysing past exam papers, the J05 paper always seems to be well written. They cover the expected subjects each time and, on top of that, the J05 manual is also well written and with it covering less areas than the R04 syllabus, it is much more manageable in terms of size!

An Uncomplicated Start

The April exam began nicely with a question on an LTA charge for someone about to reach age 75 and the transitional protection she might be eligible for. Question 1 gave a total of 11 marks and so students should have been happy with this uncomplicated start.

Question 2 – for 6 marks – was on the benefits that would be paid by the Financial Assistance Scheme for someone about to reach the scheme’s normal pension age.

Next, came 10 marks for outlining relevant factors when carrying out an annual review of a FAD plan.

Question 4 tested the potential death benefits from a DB scheme for a member who died whilst in service leaving a wife and three young children with 12 marks on offer here.

Next for 15 marks, came a two-part question; part 1 gave 10 of the marks to show how a UFPLS is taxed on a month one basis and the net lump sum that the higher rate taxpaying client would receive.  The second part of the question tested the drawbacks of the client taking this course of action.

An Easy Calculation

Question 6 was another calculation – testing the maximum PCLS that would be paid for a client who had scheme specific PCLS protection.  This should have been an easy calculation for a well prepared student.

Question 7 tested the death benefit options for an uncrystallised GPP and a lifetime annuity – both giving 4 marks each.

Cash flow modelling formed the basis of question 8; another two-part question both giving 4 marks – firstly candidates had to describe how a cash flow model could be used and the second part tested the limitations of such a model.

Question 9 tested capped drawdown and the conditions that must be met when transferring one fund to a new fund.

Question 10 tested the trivial commutation rules; the criteria that must be met before a trivial commutation lump sum can be paid for a total of 8 marks.

State benefits were the subject being tested in Question 11; specifically for 5 marks how to claim a tax-free lump sum for someone that was entitled to a pre-2016 State pension but had deferred it.

A Fair Bit of Concentration Needed

Question 12 was for 12 marks and needed a fair bit of concentration to read through the three paragraphs of information!  However, the crux of the question was the drawbacks and benefits of a client taking a CETV to use FAD or take an early retirement pension and PCLS being offered by the scheme.  The information included the fact that they needed £4,000 of additional income each year and wanted to gift their son a lump sum.   There was a lot here for the candidate to get their teeth into!

Question 13 tested a specific section of the COBS rules; the relevant circumstances that have to be considered when a firm is making a personal recommendation to a client regarding income withdrawals.

Question 14 tested the benefits of drawing an income via phased annuities rather than phased FAD and finally question 15 – another lengthy question with the ultimate question asking for an explanation why the client can best achieve their various objectives by taking a lump sum from an ISA rather than from their dependant’s FAD.

Comparison with the October 2017 Exam Paper

If we compare this to last October’s exam paper, we can see many similarities in format and areas being tested, for example, the last four exams now have tested the LTA tax charge in Question 1.  The past papers certainly seem to be a good way of revising for this exam and yet again this paper in April seemed like a very fair test of the syllabus with no curveballs.  In 2017, almost 70% of students passed the J05 exam – the highest pass rate for the written J0 papers, which also includes J02, J03 and J07.

Grab the resources you need!

If you’re studying for your CII J05 exam, and you want to be fully prepared, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the J05 mock paper taster now!