The CII J05 March 2023 Exam in Review

In this article, we’re looking at the CII’s Diploma in Financial Planning J05 exam paper that students sat in March – 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.

This article is correct as at 13 May 2023.

You can find a copy of the exam guide here.  

Two hours are given to answer 15 questions for a total of 130 marks; a pass gives students 20 Diploma credits.

Question 1 

As has been standard over the years, J05 commenced with a lifetime allowance question – we’re not quite sure what the writers of this exam will do once it’s gone. In this question, we were introduced to Mia, an employed architect with several pension entitlements and asked to explain how they will be treated for lifetime allowance purposes. This was fairly straightforward stuff and for 10 marks, solid scores should have been on the board.

Question 2 

In this question, we met Rafi, aged 62 and just retired. He had only 4% of his lifetime allowance left and wanted to make an uncrystallised funds pension lump sum (UFPLS) withdrawal in excess of this. The question asked about the overall tax treatment. This was only 5 marks, but with no calculations required, most candidates should have been able to pick up the majority.

Question 3 

This was an AF7-style fact-finding question regarding the further information you would need to advise Angus on whether he should take his scheme pension or the cash equivalent transfer value on offer. This may have caught students, who are not also looking at pension transfer papers, on the hop a little. The good part is that the question gave very little information and therefore with 12 marks available, there was plenty of scope for good scores without the level of minute detail sometimes required in AF7.

Question 4 

Question 4 covered Hana, who had a scheme pension and a dependent’s flexi-access drawdown plan, which were subsequently left to her daughter on her own death. The question asked for a summary of the death benefits available and their income tax treatment. Again, nothing too remarkable here, death benefits have been tried and tested many times in CII pension exams over the years and for 10 marks, good scores should have been available.

Question 5 

This was a comparison question requiring an analysis of the factors to consider when advising on whether to take a PCLS or an UFPLS. This has been seen before in both the level 4 and the level 6 CII papers. Whilst the basic points (free of income tax, does not trigger the MPAA etc…) are fairly evident, it can be tricky in this type of question to come up with the number of points that the CII require for a 10-mark question.

Question 6 

Question 6 introduced Abi and her divorcing husband and her choice of a pension sharing or earmarking order, the former of which would be in the form of a cash equivalent transfer value rather than a shadow membership. The question asked for the benefits of the pension sharing rather than attachment order. This should not have been too taxing and for six marks, most candidates should have been able to score the majority.

Question 7 

This question revolved around Cindy, aged 64 and employed who does not have enough qualifying years for a full state pension. We were asked to explain why she may not have enough qualifying years and what action she can take to fill these gaps. Part I was fairly straightforward (there are any number of reasons she may not have a full entitlement – working part-time, time out of the workforce to study, raise children, she may even have been in prison!) Part II basically required an explanation of the class 3 NIC process.

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Question 8 

Here, we met Arnie (no, not that one!) aged 72 and in excellent health. He was looking for advice on how long his portfolio will last. The questions covered the purposes of lifetime cashflow modelling and the most appropriate factors to consider in mitigating the risk of the funds running out. Whilst most advisers or paraplanners will have a pretty good understanding of cashflow modelling, again, here, the difficulty may lie in assessing exactly what the CII require and coming up with enough answers to cover 15 marks without repeating.

Question 9 

This was a 14-mark question asking firstly three advantages and three disadvantages of a fixed-term annuity and secondly the factors which will influence the annuity rate Melania (the client) will receive. Fixed-term annuities are not regularly used by a lot of planners and whilst annuity rate factors might be more straightforward, part 1 of this question had the potential to be a lot more tricky.

Question 10 

This question covered the conditions required to be met by HMRC to access benefits as part of ill-health early retirement and how they will be treated for lifetime allowance purposes. This was only a small six-mark question and it should have been possible for reasonably prepared candidates to score most of the marks on it.

Question 11 

This was a ‘hot off the press’ question regarding the forthcoming increase in the normal minimum pension age and the transitional protections that will be put in place for those who had an existing right to take benefits prior to age 57. Whilst this sort of thing has happened previously, firstly when the minimum pension age was introduced at A-day and then when it was increased to 55 in 2010, this has not been the case for a while. This was only 5 marks, but is a good bet for a repeat outing in the coming years.

Question 12 

This question concerned Petra, who is separated from her husband and has one independent adult child. It concerned the reasons it was advisable for her to complete a death benefit nomination for her pension. This is something which has been asked on plenty of occasions previously and should not have come as a shock to the well-prepared.

Question 13 

Question 13 covered pension scams, the most common tactics used by scammers to trick members out of their savings and the pensions regulator’s four key principles for customers to protect themselves from scams. This was a less well-tested area and though the level of difficulty was not particularly high for those who knew the subject matter, candidates finding themselves with less revision time could have been forgiven for not having seen this as a key focus area.

Question 14 

This question concerned Aarav, aged 61, who was working part-time and drawing on his capped drawdown plan to supplement his earned income. This was a fact-finding question with a twist, asking for the additional information we would require when advising him on whether or not to convert to a flexi-access drawdown plan. Whilst fact-finding questions are often seen in pensions exams, this is the first time we have seen one applied to this scenario and it may well have thrown some candidates.

Question 15 

Finally, we finished up with a pretty basic regulatory question, asking the circumstances that should be considered in line with COBS 9.3 when the firm is making a recommendation regarding income withdrawals. This was a fairly basic memory test and it ought to have been possible for well-prepared candidates to score very close to the full 7 marks, the more so as a similar question came up in the last sitting.

Overall, there were some interesting twists on this paper, though also plenty of the usual staple diet questions. Exam technique and the old axiom of ‘pick the low-hanging fruit first’ were key to achieving a successful outcome in this paper.

Comparison with the September 2022 Exam Paper 

Let’s compare this paper with what was tested in September 2022: That exam guide can be found here. 

The topics covered were:  

• Lifetime allowance
• Steps in the transfer process
• Transitional protections
• Longevity risk
• Pension transfer considerations
• Deferred state pensions
• Small pots
• Capped drawdown/ GAD calculations
• PCLS vs UFPLS
• Spousal bypass trusts
• Cashflow modelling/stress testing
• Pension input calculations
• Death benefits
• Pros and cons of annuities
• Flexi-access drawdown and risk factors

We can see here that the regular themes continue to come through. Lifetime allowance/protection, cashflow modelling, drawdown and annuities, PCLS and UFPLS, death benefits and risks all continue to be tested regularly. It is also interesting that both papers have included fairly substantial questions surrounding defined benefit transfer advice.

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!