The CII J05 October 2020 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

This time around, the exam started with a calculation of the lifetime allowance tax charge; this was for 8 marks and should have caused little problems for candidates.

Question 2

Candidates were asked to explain, with reasons, the steps a client must take before two defined benefit schemes will agree to transfer funds to a personal pension plan. This seems like a diversion from the normal question asked in J05 but for eight marks, we hope candidates would have picked up most of the marks.

Question 3

This was a short question asking for an outline of the statutory minimum increases that a defined benefit scheme must apply to a pension once it is in payment.  The scheme had been contracted out prior to 2016. This may have caused difficulty for those candidates who had not committed these rates to memory.

Question 4

Here, candidates were introduced to someone in the process of finalising their divorce.  The question asked for the advantages of their using a pension sharing order rather than an earmarking order. The question was for five marks.

Question 5

Question 5 was the first of several ‘factors’ questions. Candidates had to outline those that would be taken into account when advising on whether to take a lump from a personal pension via a UFPLS or as a PCLS. This was for 10 marks.

Question 6

The sixth question was quite a detailed mini case study and again was a ‘factors’ question. Candidates had to outline those that would be taken into account when advising on whether to accept a CETV and utilise FAD rather than take the scheme pension and PCLS offered by the scheme.  This was for 12 marks, and candidates should have been prepared for this type of question.

Question 7

This was another quite detailed mini case study regarding Paulo, who at the time of his death, was receiving a scheme pension from a DB scheme. The question asked for an outline of the death benefits available to his sister, including the tax treatment in respect of the scheme pension and an uncrystallised personal pension.  The whole question was for 15 marks, and as death benefits come up in most exams, candidates should have been well prepared.

Question 8

Here was another ‘factors’ question. Delegates were asked to state eight factors that will influence a lifetime annuity rate that a client aged 63 would receive at age 65.

Question 9

This question tested State pension and NIC credits. The question asked for the potential circumstances that could have resulted in NIC credits for the client and was for five marks.

Question 10

Question 10 asked for the factors to consider when deciding whether to invest savings into a personal pension plan or an ISA.  This was for 12 marks and should have not been difficult for delegates.

Question 11

This one asked for five pieces of information that would be included on a State pension benefit statement.

Question 12

Question 12 asked for the drawbacks of withdrawing a pension fund as an UFPLS and purchasing a buy-to-let property to provide income; this was for seven marks.

Question 13

Candidates were asked to provide an outline of the relevant circumstances that must be considered when a firm is making a personal recommendation to a client regarding income withdrawals, and this was for eight marks.

Question 14

This was the second calculation in the paper, and candidates had to work out the amount of fund which must be crystallised to provide a net amount of £15,000 as a UFPLS.  This was for five marks.

Question 15

And finally, Question 15 was yet another factors question; the question was in two parts: firstly, candidates had to state eight factors that should be taken into account when carrying out a projected cash flow analysis, and part (b) asked for an outline of six scenarios that should be discussed when carrying out a stress test of a cash flow analysis.

Comparison with the October 2019 Exam Paper

Let’s compare this paper with what was tested in October 2019, the last time J05 was sat. The exam paper can be found here.

The areas tested were:

• Death benefits under a scheme pension and a dependant’s capped drawdown
• Advising a client on whether to take a scheme pension or accept a CETV
• Calculation of amount that will be invested in FAD
• Transfer of a RAC with a GAR to a PP and the advice requirements
• Factors to take into account when advising taking an income via an annuity or FAD
• Tax payable if fund taken as a UFPLS before and after age 75
• State pension credit
• Longevity risk
• Deferring State pension and income tax position
• Conditions to be able to draw benefits before 55 and the restrictions that apply
• Factors to take into account when advising on commutation
• Benefits and drawbacks of drawing an income from a SIPP via phased drawdown
• Factors to take into account regarding amount of income to withdraw from FAD
• Conditions for a client to access benefits on the grounds of ill health
• Factors to take into account when carrying out an annual review of investments

The J05 paper is fairly formulaic, and candidates therefore would do well to study as many past papers as possible to ensure they are comfortable with the format of the exam and note how the style of question is similar in each paper.  You will see that in each paper, there are at least two or more ‘factors’ questions, and candidates should ensure they are comfortable with answering this type of question. A lot of pension topics are covered but the manual is a manageable size and should be studied carefully and in full before attempting the exam.

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!