The Main Changes in the 2024-25 CII R01 Study Text – Part 1
Here, in the first of a two-part series, we take a look at the main changes that you’ll come across in the first five chapters of the 2024/25 version of the CII’s R01 study text. This article is particularly relevant to the R01, R06, and AF5 exams.
This article is correct as at 6 August 2024 and is relevant to the 2024/25 examinable tax year.
There has been one major syllabus change in the first half of the study text, reflecting the shift in the regulatory landscape away from being driven by the EU. The majority of the other amends stem from the Autumn Statement 2023, the Spring Budget 2024 and the turning of the tax year.
R01, Chapter 1
General
There are fewer multi-distribution organisations as of 2024, with both Sainsbury’s and Tesco withdrawing from the market to focus on core activities.
The UK payment systems industry has grown in size from £81 trillion to £95 trillion.
The increase to State Pension age from 66 to 67 between 2026 and 2028 is noted, as is the fact that it is paid from the public’s NI and Income Tax contributions, rather than each of us accruing individual pots.
Global Regulation
We have a change of section heading in Chapter 1, from ‘How the EU impacts UK regulation’ to ‘How Global Regulation impacts UK regulation’. The content, however, remains largely the same.
R01, Chapter 2
State Benefits
This section has been updated so that all figures relate to the 2024/25 tax year.
The ‘Health costs’ scheme has been updated to reflect its new name – the NHS Low Income Scheme (LIS).
Additional State Pensions
The detail on the State Graduated Pension, SERPS, and S2P has been removed and replaced with a web link for any students wishing to find out more about the legacy additional State pensions.
British Savings Bonds
NS&I Guaranteed Growth and Guaranteed Income Bonds are on sale once more in the form of British Savings Bonds.
Sustainability Disclosure
The Financial Conduct Authority (FCA) has introduced new rules on sustainability disclosure as part of its efforts to enhance transparency and accountability in the financial sector regarding environmental, social, and governance (ESG) issues.
The measures encompass an anti-greenwashing rule, a labelling system for sustainable investment products, and disclosure regulations. Additionally, they include requirements for consumer-facing information, detailed disclosures for institutional investors and interested consumers, and guidelines for distributors.
Cash ISAs
The minimum age for a Cash ISA has been raised to 18 (from 16).
Multiple ISAs
Since 6 April 2024, savers can open and pay into multiple ISAs (compared to just one per tax year in previous tax years). This rule does not apply to Lifetime ISAs.
UK ISA (British ISA)
This new ISA (once live) will offer an additional £5,000 allowance on top of the current ISA allowance, providing a new tax-free investment opportunity in the UK.
Innovative Finance ISAs
Long-term asset funds, open-ended property funds with extended notice periods and cash have been added to the list of qualifying investments in an innovative finance ISA.
R01, Chapter 3
Class 2 National Insurance contributions (NICs)
No self-employed person is required to pay Class 2 NICs, though if they earn under the small profits threshold, they can be paid voluntarily by those who wish to build up entitlement to the New State Pension. Those earning above the small profits threshold will be deemed to have paid Class 2, without actually having to pay it.
Leasehold and Freehold Reform Bill
The goal of the Leasehold and Freehold Reform Bill is to implement long-term changes that enhance home ownership for leaseholders in England and Wales by empowering them and strengthening their consumer rights. The Bill is currently at the Committee stage in the House of Lords.
Mortgage Guarantee Scheme
Extended until end of June 2025.
R01, Chapter 4
Section C has been renamed ‘The Role of international Governments on UK Regulation’ (its previous title referred to the EU).
The detailed content of the various legislative EU acts (i.e. treaties, legislation, regulations, directives and decisions) has been removed.
The section on the European Supervisory Authorities (ESAs) has been deleted.
Other Global Regulators
We have a new section on global regulators, specifically those in the USA (where a rule-based system is operated), to reflect the updated syllabus.
- Securities and Exchange Commission (SEC) – An independent agency of the US Federal Government. SEC regulates financial markets to protect investors and maintain fair, orderly and efficient markets and facilitate capital markets. SEC aims to promote capital markets which inspire public confidence and provide an array of financial opportunities to US investors (retail and institutional).
- Financial Industry Regulatory Authority (FINRA) – Regulates US market broker-dealers. Its remit includes creating rules around financial protections, licensing securities products sellers, financial advertising regulations, suitability and relevant disclosure.
Trustees, ESG and Sustainability
As part of their duty of care, trustees should take ESG and sustainability factors into account in their decision-making or risk facing legal action.
Where a settlor wants ESG or sustainability factors to be considered in investment decisions, this should be included in the trust deed to take priority over purely financial considerations.
R01, Chapter 5
New Secondary Objective
Both the FCA and the PRA have a new secondary objective – to facilitate the international competitiveness and growth of the UK economy.
Skilled Person Reviews
If the FCA is worried about a firm’s activities, it may use a third party (a ‘skilled person’) to conduct a review on its behalf.
FCA’s Regulatory Approach
The references to fixed / flexible portfolio and the three pillars have been removed from the FCA handbook. They are referred to in the study text as being in the past tense, but remain in the text as we await the new rules which are not expected to be too different.
There are now just 5 supervisory principles:
- Forward looking,
- Outcomes-focused,
- Proportionate and evidence-led,
- Transparent, and
- Integrated and coordinated.
Retirement Income Advice Thematic Review (2024)
This review aimed to:
- Assess the market’s functionality post-2015 pension freedoms.
- Evaluate if firms consider the specific needs of customers in decumulation.
- Ensure customers receive appropriate advice when accessing pension savings, addressing any identified issues.
- Develop future regulatory focus areas.
Key areas identified for improvement include:
- Income withdrawal strategy and methodology,
- Risk profiling,
- Advice suitability,
- Periodic review of advice suitability and
- Controls.
The FCA particularly noted significant flaws in how firms use cashflow models to demonstrate advice suitability and a general lack of necessary information to support recommendations.
Personal Investment Firms (PIFs)
The FCA is consulting on capital requirements for Personal Investment Firms (PIFs) to determine how much extra capital PIFs should hold to cover potential liabilities from past advice.
A four-step process is proposed:
- Identify potential redress liabilities.
- Quantify potential redress liabilities.
- Set aside capital by deducting potential redress liabilities from capital resources.
- Implement an asset retention requirement if the firm is undercapitalised after setting aside the capital.
Additional capital reporting requirements will be introduced.
P1 – P3
Finally, reference to the FCA’s prudential categories 1 – 3 has been removed from the study text.
Grab the resources you need!
If you’re studying for your CII R01 exam, and you nervous at the thought of exam day, grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the R01 mock paper taster now!
Alternatively, you can download the taster for AF5 or R06 if one of those exams is on your horizon.
