Whether you’re heading towards the next sitting of AF7 or planning to sit in the future, this latest article from the team at Brand FT has some useful guidance.
The CII’s AF7 pensions transfer unit is a tricky, technical exam which requires candidates to have a good knowledge of a broad range of general pension-related subjects as well as in-depth knowledge of pensions transfers.
That said, there are some clear strategies that can help candidates achieve the pass.
Time Management
The CII encourage candidates answers to be brief and as concise as possible using note format and short sentences. This approach is sufficient to comfortably pass an AF exam, including AF7. It is not necessary to include long sentences that take time to type out.
Another time saving tip is to pick the low-hanging fruit first. The majority of AF7 questions will relate to core knowledge and core advisory skills but there are always one or two curveballs.
You’ll know within a few seconds whether you have a good idea how to answer the question.
If you’re struggling, don’t waste valuable time, you can always come back and have a guess later once the easier marks are in the bag.
Candidates who have an adequate grasp of the core knowledge will always be in a strong position to pick up most of the marks in AF7, so don’t waste too much time over the peripheral areas.
State the obvious
Answers should assume that the examiner knows nothing about the subject. Even on very technical questions, you can often pick up marks for starting with the very basics.
For example if the question is asking why you’ve recommended Mr X should keep his DB scheme benefits and Mrs X should transfer hers, no doubt there will be a lot of technical answers around commutation rates, death benefits and the like, but simply stating that ‘He has a larger pension’ will also pick you up a mark – it’s pretty obvious but it is a valid reason for the recommendation!
Question styles
The CII uses several different verbs within AF7:
• If the question is asking to ‘State’ or ‘Identify’, this simply requires the candidate to state information or factors without the need for elaboration. The answers here will tend to be shorter. For example, you’ll often see questions worded as ‘State the factors…’ – so answers such as ‘Timescales’ or ‘Health’ will be sufficient.
• If the questions ask you to ‘Explain…’, this requires a greater deal of explanation. Whilst short bullet pointed sentences are still acceptable, you’ll need to state what is relevant and why. So, if ‘health’ is the factor you’ll need to add some context as to why e.g. ‘Their good health means they can purchase life assurance’
The paper will almost always contain a fact-finding question, usually requiring candidates to state additional information required to advise the client(s) on the potential transfer of their pension benefits. Reading the question carefully is key here.
For example, the question may ask for either information required from the client(s) or information required from the scheme. If the question asks for one, then answers required from the other will not gain marks.
Candidates will also invariably be asked a question which requires them to give advice. In recent sittings of AF7, the CII has tended to provide the recommendation and ask the candidate to justify it.
The points in the answer need to be specific to the client’s circumstances. ‘Attitude to risk’ will not suffice. ‘Adventurous attitude to risk means they are likely to be comfortable with investment volatility’ likely will.
Technical knowledge
AF7 is a technically challenging but a somewhat predictable exam.
The first question is always related to compliance requirements. This may vary from factors specific to AF7 such as contingent charging to more general pension related matters such as drawdown considerations and general requirements such as vulnerable customers.
There are a number of these covered in the study text and a good knowledge of the requirements of the regulator is key.
AF7 contains a number of ‘staple diet’ questions. Core subject matter is regularly covered within the paper.
These are the areas to which candidates need to devote the majority of their revision time and typically include:
• Death benefits from DB and DC schemes.
• Pension Protection Fund, scheme solvency and employer covenants.
• Lump sum allowance, lump sum and death benefits allowance and transitional tax-free cash amount certificates.
• Investment and decumulation strategies for transferred funds including cashflow modelling, stress testing, sustainable withdrawal rates and management of sequencing risk.
• Appropriate pension transfer analysis considerations and the transfer value comparator.
• The transfer process including legal requirements and statutory timescales.
Summary
AF7 is undoubtedly a tough ask. However, pass rates have improved over the last few years perhaps related to the fact that candidates now know what to expect and how to prepare for the exam.
Those who can combine the core technical knowledge with the exam technique required to manage time effectively and articulate their points concisely will be in a strong position to score well on it.
To find out more about how Brand FT can support you with your studies, you can head to their website at: https://brandft.co.uk/
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