I complained to the CII regarding the October 2018 examination on the following grounds
1: the lack of accurate syllabus information on spousal bypass trusts which attracted substantial marks. These were not documented in the syllabus but tested in the exam.
2: Inadequate information regarding whether candidates would be tested on the new APTA regulation which came into effect at the time of the examination or whether it would be the old TVAS method. The APTA was documented in the syllabus but never tested.
My complaint was rejected by CII. I have listed the dialogue with them below with my responses in blue and the CII’s comments in black.
Thank you for your reply (below) which is very much appreciated. I have responded to your comments in in blue. Please note the study text is the pension transfer book with contains the syllabus and study material.
Death benefits, including the use of bypass trusts fall into syllabus area 2.3 ‘main features of receiving scheme and their impact on the transfer recommendation’.
Also, covered under 2.4 (explain the impact on income and death benefits of tax).
Please can you kindly direct me to this in the study text within the pension transfer book not the syllabus.
Bypass trusts are covered under syllabus area 3.2 Income Tax and Inheritance Tax Planning.
I’m struggling to find the study text in the Pension Transfer book that would prepare me for these questions. Income tax and Inheritance planning headings would not alert me to the depth of reading required on Spousal bypass trusts, so please can you refer to me to exact study text in the book that would have prepared me for this question, especially in light of the required answers as detailed at the foot of this email.
This is a very relevant topic for a transfers exam. The decision to transfer often includes objectives regarding death benefits and it is not uncommon for people to wish to transfer because they have no spouse and would like to provide for adult children. Also there are often scenarios (e.g. a second marriage) where someone wants to provide for their own children and not their spouse (as in the October AF7 question). The advice to transfer does not just cover the recommendation to actually transfer (or not), it also covers the setting up and understanding of the scheme into which the benefits are being paid – hence questions on death benefits, annuities, drawdown etc are quite valid.
If this is a very relevant topic why is there so little information on it in the official study text book and also no weight on it in the CII study sessions, especially in light of the amount of marks involved which are significant? One of the benefits and motivations for transferring benefits from DB schemes to a flexible plan would be the tax efficient succession planning which would in most cases negate the need for a SBT and I suspect this is why there is no emphasis on it in the Pension Transfer study book.
It is also assumed that all AF7 candidates already have the knowledge gained from a study of unit R04 Pensions and retirement planning and J05 Pension income options or equivalent. Both the R04 and J05 study texts have reference to bypass trusts.
I agree that you clearly state that RO4 is required for this exam which I have passed. However the point is that the study material for SBTs is in a separate paper (JO5) than the recommended study book and is insignificantly documented as “recommended reading”. It should have been “essential reading” with the exact chapter and link to JO5” at the very least. Preferably it should form part of the pension transfer study text due to its weighting in the exam.
Please also find attached the J05 syllabus and you will see that bypass trusts are also included in this syllabus, under syllabus area 7.6. I have no access to this material
The JO5 syllabus is irrelevant to AF7 how would we know that this was applicable to us if it’s not listed in the AF7 syllabus?
Whilst bypass trusts are not specifically included in the AF7 study text, this area has been tested more than once both in the J05 and AF3 units, and the income tax position is covered in Chapter 8 section H4 of the recommended reading J05 study text.
Your points above are noted, However, this is not a one-off question, it has a heavy weighting in the exam and absolutely should have been included in the pension transfer study book under a specific heading.
Additionally, question 10 accounted for a total of 15 marks, only 7 of these marks (part b) were related to bypass trusts. This was not actually a spousal bypass question as there is no spouse in the case study.’
The expected answers (please see below from my feedback) are specifically related to spousal bypass trust and are clearly are spousal bypass questions and include Rachel from the case study as a subject.
- If pension scheme trustees choose to pay the death benefits to the bypass trust, the bypass trust trustees then have discretion over the distribution of the funds.
- Rachel can include a letter of wishes with the bypass trust documents to help the trustees understand her wishes.
- The assets within the bypass trust are not part of the children’s estates for bankruptcy or divorce purposes.
- Bypass trusts are complex/ the benefits held within the trust may incur periodic and exit charges.
- If Rachel dies after age 75 then the pension funds will be paid into the trust after a 45% tax charge has been applied.
- Any income paid to the children from the bypass trust is paid with a 45% tax credit.
- Some or all of this tax credit may be reclaimable based on the recipient’s tax status, effectively taxing the income received at the recipient’s highest marginal rate.
This is a huge amount of marks for an area with so little study emphasis. I only failed by 2 marks, I have read the whole study book, attended a CII study session and paid for feedback. I truly believe that the lack of support given in this area, knowing you were going to test heavily it on contributed to my decreased mark.
Please could you advise me asap if your views remain unchanged so that I can progress the matter to OFQUAL.
I look forward to hearing from you.
This is another email from myself to the CII
Good Morning,
Thank you for your email.
Re your last paragraph I have already officially complained to complaints@cii.co.uk which was acknowledged on 17th January 2019 so please could you kindly explain why this has to be done again before I can go to OFQUAL?
I’ve addressed your responses below, starting with your first point about the pass mark. CII’s pass mark is higher than to the other main two examining bodies whose qualification carries the same weight in the industry and considering this, the syllabus learning outcomes should be clearly documented and I don’t feel they were on this occasion as I have outlined below and in my previous emails.
I take on board the CII’s stance on the timescales of testing after a regulatory change. However, the syllabus states 1.1. chapter and section 1A-1C which details the new APTA process and is what many advisers, including myself revised. I am clearly not alone in my view. https://www.ftadviser.com/pensions/2018/11/07/cii-exam-fails-to-cover-new-rules/
You’ve stated that “candidates are aware of our testing position as on the important notes section on the first page of the syllabus, we say that exams are generally based on the English legislative position three months before the date of the exams”. However, this also states that candidates can find out the latest information on changes to law and practice and when they will be examined but this doesn’t give any direct guidance on the APTA testing, it just contains the same generic statement. This should be absolutely specific to the exam!
Pg 3 states “To assist you in your learning we have followed the syllabus with a table that indicates where each syllabus learning outcome is covered in the study text. These are also listed on the first page of each chapter”. No reference to J05, which is a separate paper and contains essential learning material.
Regarding the syllabus guidance on Divorce, it only states chapter and section 5A-5F (PG 10) which has no relevance to the exam questions. It should have clearly stated J05 and the relevant chapter. The reading list (pg7) states “the following list provides details of additional resources which may assist you with your studies. Note: the examination will test the syllabus alone.” It then goes on to list RO4 and JO5 further down.
Pg 14 states D: Divorce and directs you to the page for the syllabus learning outcome 5/31 – which does not contain any information on bypass trusts!
I have passed R04 and am familiar with JO5 but would still need a direct and accurate syllabus in order to revise efficiently for such a broad spectrum exam. We have to know which areas to concentrate on.
In my feedback, the examiner said
“Additionally, question 10 accounted for a total of 15 marks, only 7 of these marks (part b) were related to bypass trusts. This was not actually a spousal bypass question as there is no spouse in the case study.’
Your colleague, Esther Brooks then stated in her previous email:
“As you state, one of the motivations for transferring benefits from DB schemes is to seek to maximise death benefits and for succession planning. In most cases it probably does negate the need for a discretionary trust, but not in the circumstances set out in the case study.”
Worryingly, there is a significant difference of opinion between your colleagues here and this seems to be true of the marking as I have a colleague who failed the exam by more points than me (mine was 2) and they got a pass on a remark which was a significant correction to the original mark.
I have sat many exams in my career and I’ve had to sit a few of them twice but have never had cause to complain until now. However, I am deeply concerned on this occasion as I know that had I been properly directed to the relevant study material as detailed above I would have got those extra two marks. I’ve read the book twice and attended 2 CII revision days. This is a very costly exam and the least that I would expect from such a high-profile company is an accurate and informative syllabus, clear provision of the study material and total clarity on exactly what regulation we will be tested on.
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