The CII’s April 2016 J05 Exam: Well-Written and Fair

In this article, we discuss the questions set in the April 2016 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:

http://www.cii.co.uk/media/6827546/j05_april_2016_qp.pdf

Two hours are given to answer 15 short answer questions for a total of 130 marks and an exam pass secures 20 Diploma credits.

Questions 1 to 6

The April exam began with an eight-point question to calculate a lifetime allowance tax charge.  Not a bad start.  Question 2 was a theory question on the criteria for an UFPLS to be drawn.  The paper continued with trivial commutation and the taxation of a FAD fund.  Another calculation followed; this time, working out the serious illness health lump sum a client would receive and then an explanation of the death benefits on a lifetime annuity and the revenue requirements for a short-term annuity.

Questions 7 and 8

Question 7 tested the income tax treatment of withdrawals from a FAD fund – 5 points for the first year and 2 for subsequent years.  This is testing relatively new legislation but clearly important for an adviser to know. A big 10-mark question then followed, which tested the risk factors when advising on pension decumulation; this should have been a nice question for most delegates.

Question 9

The question stem for the next one (number 9) was quite detailed with the client having a capped drawdown fund as well as an uncrystallised personal pension.  The answers required a calculation to provide an income from the PP and the options on death from both.

Questions 10 through 15

The paper continued with a question on guidance provided by Pension Wise, questions on the single-tier State pension, the drawbacks of using an UFPLS to buy a buy-to-let property, eight circumstances when a scheme pension may be reduced or stopped, a question on spousal bypass trusts and finally Question 15 tested delegate’s knowledge on cash flow analysis.

This paper seemed to us, relatively straightforward with no particular curve balls.

Let’s compare it to the previous paper which was sat in October 2015.  If you haven’t seen this then click on this link:

http://www.cii.co.uk/media/6451979/j05_october_2015_qp.pdf

On first glance, it also seems like a fair paper with similar areas being tested, such as risk, trivial commutation and the LTA charge.  We did notice eight marks for the State benefits: Bereavement Allowance and the Bereavement Payment, and we can imagine some delegates may have struggled with these. In our experience, State benefits are not always the most thrilling areas to focus on, with some students preferring to concentrate on the other areas.  Hopefully, losing some of those eight marks would not have resulted in a fail, as long as the other areas were studied well.

Both papers seem reasonable for someone working in pensions.  Looking at the published pass rates for 2014, we can see that out of the written J0 papers, which is now only J02, J03 and J07, JO5 had the highest pass rate of 58.68%, just sneaking ahead of the Trusts paper which had a pass rate of 58.15%.

However, in 2015, the J05 pass rate dropped back to behind both J02 and J03 with 57.59% of students passing, only beating J07, which continued to stay bottom of the J0 written papers.

Pensions will always be a challenging subject with the continual raft of changes, but let’s hope the examiner continues to make it a well-written and fair paper.

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!

Over to You…

Have you taken the J05 exam in either of the April or October sittings? What did you think of it?