The Chartered Insurance Institute (CII) R04 Pensions and Retirement Planning unit now has the lowest countrywide pass rate. Why? Luiza Todd looks at the issues for candidates.
The CII pensions unit had a countrywide pass rate of 61% in the 2020 calendar exam year. This is a unit that requires a minimum of 50 study hours (yeah right, and the rest!) and once successfully passed gives candidates 10 CII credits (it should be worth so much more, in my opinion!).
What make this R0 unit such a tough ask? Why do many candidates ‘defer their success’ in R04, some on multiple occasions? The answers to these questions have a few layers, so let’s start with layer number 1.
Whichever HMRC bright spark came up with the phrase ‘pension simplification’ clearly has a wicked sense of humour. After decades of different changes brought in through the annual Finance and Pensions Acts, governments might like to tell themselves pensions are simpler, but we (and many R04 candidates behind us) are here to say, ‘no they are not’. There are still so many different rules associated with different pension policies, regimes, caps, valuation factors, tests, death benefits, state pensions and ages, only a real pensions technician would dare to say this was simple.
Take the annual allowance charge – one of the caps introduced in 2006 in an attempt to simply pensions. It started off as relatively simple, acting as a cap on annual defined contribution (DC) pension contributions and defined benefit (DB) benefit accrual. If the cap was breached a tax charge was triggered at the individual’s marginal rate, known as, wait for it, the annual allowance charge. So not a hugely complex cap to start with.
Fast forward to today and we now have additional tweaks and changes brought in by successive Chancellors such as carry forward, tapering of the annual allowance and the cherry on its cake, the Money Purchase Annual Allowance (known in less respectful circles as More Pain for Advisers and Administrators). Simples (not!).
So, what about layer number 2 in our pension’s onion? (Stay with us, it’s a metaphor, we at BTS loved the original Shrek movie). Have you ever come across a subject that has more abbreviations than pensions? From your AA to your LTA, from the AAA to the MPAA, RPSs, PPS, SSASs, SIPPS and RACs to name a few there are just too many of them to list here and keep this article vaguely amusing. Keeping a handle on which one means what is exhausting on its own, let alone what they each mean and how they work.
On to layer number 3 – the CII R04 examiner is not content with testing candidates on current rules, to have balanced knowledge levels candidates are expected to know some of the old stuff as well! Take the state pension as a good example of this. Simplification of the state pension came in from 6 April 2016, yet the R04 exam bank contains questions on old rules such as Category B basic state pensions, old deferral rules, how savings credit works etc. Candidates must have some knowledge in relation to a long list of different pension areas, and that’s a lot for your average grey cells to have to cope with.
From there throw in all the different dates that apply to pension rules as layer number 4. As previously mentioned, pension legislation generally (that’s a favourite BTS word when coaching on this unit) is introduced via annual Pension and Finance Acts. This leads to so many different dates relating to when each new tweak to pension rules came in. Take inflation proofing of pensions as a good example of this; revaluation pre-retirement and escalation in retirement (when you are older you are more likely to use the escalator is how we at BTS remember this). Both have minimums that DB schemes usually (another favourite R04 coaching word) must adhere – so CPI capped at 5% and/or 2.5%. But the year this minimum fell is DIFFERENT for revaluation and DIFFERENT for escalation. Explain how this is simple…
Our last layer in this article, so number 5, is the age-old CII examiner use of the English language in question stems and possible answers. Take all the previous layers so far and throw into the mix long question stems, use of double negatives, grids and tables, having to identify key question information and words that are ‘exam fluff’. As if pensions and the R04 unit were not tough enough already…
As a final comment – tread carefully when selecting your R04 support materials. The complications of pensions are not helped one iota by materials that don’t explain key concepts simply, questions that are not exam style (either way too easy or terrifying complex and concentrating on minutiae that rarely if at all finds its way into the R04 questions bank). The wrong choices can easily lead to multiple exam success deferral and a lifelong pathological hatred of pensions.
This article has been penned by BTS Director Luiza Todd CFP FPFS. Luiza’s favourite subject is pensions (sad but so true), and her ambition is to convert as many R0 candidates as possible over to her ‘crew’ of pension lovers.
About Bespoke Training Solutions
Bespoke Training Solutions (BTS) have been supporting regulated exams for 18 years, specialising in R0 support with outstanding candidate tracked results and feedback. Resources include digital and printed study guides, group and 1:1 training, e-Learning modules and a mobile app R0 Study Buddy which provides practice exam questions. Visit www.bespoketrainingsolutions.com to learn more on how BTS can help you on your regulated journey.