The CII J05 April 2019 Exam in Review

In this article, we’re looking at the CII’s Diploma in Financial Planning J05 exam paper that students sat in April – this is the exam on Pension Income Options.  This will be useful reading for you if you are preparing to sit this exam in the near future; 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.  As mentioned last time, some of the questions in this paper are long compared with the other 2-hour Diploma papers, meaning students are using up more time just to read the questions before even starting their answers.

Question 1

This tested how death benefits are treated for LTA purposes, with case study information involving a pre-75 death with crystallised and uncrystallised funds: firstly, an explanation was needed and secondly, a calculation.  This was for 13 marks and not an entirely unexpected start to the paper!

Question 2

Another mini-case study involving a retiree from a DB scheme entering the Pension Protection Fund.  For 6 marks, an explanation was needed on how the benefits will be impacted by this course of action.

Question 3

This question asked for the criteria for a lump sum payment from an uncrystallised personal pension plan to be treated as a small pots payment including the taxation; this was for 7 marks.

Question 4

Next, there was a question on pension increase exchange, including 6 marks for identifying the key factors that should be considered before accepting an offer.  ‘Factors’ questions have been appearing in the advanced papers for a while and are now a regular feature, also on the J0 papers.  Candidates should be mindful of this during their revision.

Question 5

This question was another calculation: the net lump sum received from an uncrystallised personal pension assuming taxation is on a ‘month 1’ basis.  This was for 11 marks, and as it has featured in past exam sittings, we hope candidates were prepared.

Question 6

This was another ‘factors’ question, using information from a lengthy mini case study; this time it asked for the factors to take into account when determining a sustainable level of income from a money purchase plan.  This was for 8 marks.

Question 7

This was another question on death benefits: those available to a recent widower from an uncrystallised PPP and a lifetime annuity (for a total of 13 marks).

Question 8

The exam then moved into investment approach, and candidates were asked to explain why the current approach in the question was unsuitable and why the client might benefit from an earmarked investment strategy in retirement.  This was for 8 marks.

Question 9

We then had a two-part question on risk: for four marks, the definitions of attitude to risk (ATR) and capacity for loss were required, and for another 4 marks, the key factors that influence a person’s ATR in relation to their pension.

Question 10

Next up, was a fact-finding question: candidates had to state the information needed before advising a client on the suitability of consolidating his four pension plans. This was for 8 marks.

Question 11

This question tested (for 8 marks) the State pension system including how a State pension escalates once in payment.

Question 12

This tested the eligibility conditions for a member to take benefits from a company pension scheme at age 50 and was for 7 marks.

Question 13

This asked for the 10 steps that TPR publish that scheme members can take to protect their pension from a potential scam.

Question 14

This question asked for the benefits and drawbacks of someone with a cautious ATR utilising phased FAD rather than buying a lifetime annuity.  This was for 8 marks.

Question 15

For the final question, candidates had yet another ‘factors’ question: this time, those that would need to be considered when deciding whether to take a lump sum via a UFPLS or as a PCLS.  This was for 6 marks.

Comparison with the October 2018 Exam Paper

Let’s compare this paper with the one sat in October 2018 which can be found here.

The areas tested were:

• LTA charge
• Protection in the event of provider default for a SIPP and an annuity
• Fact-finding for someone in capped drawdown wishing to switch to FAD
• Statutory minimum increases for a pension in payment
• Factors to be considered when advising on whether to take a UFPLS
• Benefits and drawbacks of FAD vs annuity
• Factors to take into account when advising on whether or not to take PCLS
• ‘Safe withdrawal rate’ in relation to pension drawdown
• How a scheme would calculate a pension with a pension debit
• Nominating death benefits to a spousal bypass trust
• State Bereavement Support Payment
• Amount of funds in a PP to crystallise to provide required net payment
• FCA’s Conduct of Business Sourcebook
• Factors when considering PP vs ISA
• Defined benefit transfer process and consequent death benefit options

Overall, J05 always seems like a fair and well-balanced paper with a good mix between the technical aspects of pensions and the advice process. This has been reflected in the annual pass rates for this unit; in 2017 and 2018 this unit had the highest pass rate, 69.33% in 2017 and 69.58% in 2018.

We’ve said it before, but it’s worth saying again, many similarities exist from paper to paper, including the order of questions it seems.  This makes it essential for anyone studying for a future J05 exam sitting to use past exam guides in their revision preparation.

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!