The CII J05 October 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 October – 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 October 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.

Question 1

As is usually the case, this question was a test of death benefits available under a scheme pension with a guarantee period and a dependant’s capped drawdown plan.  This should not have been a surprise and should have been answered well.

Question 2

Candidates were required to fact find a client before advising them on whether to take a scheme pension on offer or accept a CETV.  It was a 12-mark question and should have been straightforward.

Question 3

This was a lengthy question involving someone with fixed protection 2014 who had already crystallised benefits in a DB scheme and now wished to crystallise a PP, taking maximum PCLS with the balance being placed into FAD.  The question, for 10 marks, was to calculate the amount that will be invested into the FAD.

Question 4

This was a two-part question, firstly testing facts required before advising the client on whether to transfer an RAC with guaranteed annuity rate to a PP and secondly explaining the advice requirements that must be satisfied before undertaking a transfer of these benefits.  The whole question was for 10 marks.

Question 5

Question 5 was the first of a few ‘factors’ questions; candidates had to outline those that would be taken into account when deciding whether to recommend that the client use her PP to buy a lifetime annuity or if they should take income via FAD.

Question 6

Next was a taxation question for a client aged 74 with 10% of his LTA left and no transitional protection. Candidates had to explain the tax payable if the whole fund was taken as a UFPLS plus a lifetime allowance excess lump sum before age 75 and then after reaching age 75.

Question 7

Candidates were asked for the conditions that must be met in order for the client to make a successful application to receive the Guarantee Credit element of the State Pension Credit.

Question 8

Delegates were asked to explain longevity risk for a total of 10 marks.

Question 9

This question included a lot of information in a small case study regarding a client who had deferred receiving their State pension, but if they took it in this tax year, how it would affect their income tax position.  This question offered 9 marks.

Question 10

Delegates were asked to outline the conditions that must be met for a member to be able to draw their pension benefits before the age of 55 without being subject to tax charges as well as the restrictions that apply when benefits are taken before age 55.

Question 11

Question 11 was another ‘factors’ question – this time, those that should be taken into account when advising the client on how much of their pension income they should commute for PCLS.  This was for 8 marks.

Question 12

Question 12 asked for the benefits and drawbacks of starting to draw an income from a SIPP via phased drawdown for 10 marks.

Question 13

Here was another ‘factors’ question; this time the factors to take into account when determining the amount of income the client should withdraw each year from their FAD.

Question 14

The penultimate question tested the conditions that must be satisfied in order for a client to access the benefits of their GPP on the grounds of ill health.

Question 15

And finally, Question 15 was yet another ‘factors’ question – this time, those that should be taken into account when carrying out an annual review of a client’s investments held within their FAD.  This last question was for 10 marks.

Comparison with the October 2018 Exam Paper

Let’s compare this paper with what was tested in April 2019; the exam paper can be found here.

The areas tested were:

• How death benefits are treated for LTA purposes
• Pension Protection Fund
• Small pots payments
• Pension increase exchange
• Calculation of net lump-sum taxation is on a ‘month 1’ basis
• Factors to take into account when determining a sustainable level of income
• Death benefits available from an uncrystallised PPP and a lifetime annuity
• Investment approach
• Attitude to risk and capacity for loss
• Information needed before advising on the suitability of consolidating pension plans
• State pensions
• Eligibility conditions to take benefits from a company pension scheme at age 50
• TPR Steps scheme members can take to protect their pension from a potential scam
• Benefits and drawbacks of someone with a cautious ATR utilising phased FAD
• Factors to consider when deciding whether to take UFPLS or PCLS

All in all, J05 is a technical paper that covers a lot of topics that might challenge those candidates who are not fully prepared and familiar with the layout of this exam.  There is a lot of information in the questions to digest before starting to compile an answer, and candidates’ main struggle might be finishing the amount of work required in the two hours given.

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!