CII AF5 Feb 2024 – is this the mystery question?


CII AF5 Feb 2024 – is this the mystery question?

The CII AF5 exam always throws up a question that no one sees coming. It’s usually on a topic that is not highlighted with any great significance in the case study and is designed to really allow candidates that are really well prepared and experienced to stand out.

This ‘mystery question’ is hard to prepare for and it’s worth saying that at this point, everything else in this article is guess work to an extent. But something stood out for me whilst analysing the upcoming February sitting of the CII AF5 exam. It was the last sentence on page 4 of the case study.

“Neil and Helen do not intend to pay university tuition fees for their children but will provide limited financial support”.

Now there is nothing particularly surprising about that sentence. Well, at least not until you consider the case study as a whole.

Neil and Helen are in a very strong financial position. They have a large amount of liquid assets, they have surplus income each year and have also indicated a willingness to downsize in the future. On top of this, they do not intend to retire for another ten years, and they have paid for private school fees for Samuel and Anna previously.

So it did stand out that we are told they do not intend to pay university tuition fees. I could be barking up the wrong tree, but if I were studying for the upcoming AF5 exam, I’d just familiarise myself with the student loan structure, just in case Neil and Helen do have a change of heart!

The student loan structure did also change from September 2023, which has flown under the radar of most in the financial planning profession (in my experience!).

But what changed? In September 2023, the student loan changed from Plan Two to Plan Five. The impact? Students taking a student loan after September 2023 will face higher levels of annual repayment and also the percentage of students likely to clear the full loan increased from an estimated 23% (for students on Plan Two) to 52% (for students on Plan Five).

What should I familiar myself for the exam?

Again, I wouldn’t spend too much time on this. This sitting of the CII AF5 exam does seem to be one of the more complex case studies and it’s unlikely that ‘the mystery question’ will lead you to passing or failing this exam. However, in my opinion, just familiarising yourself with the student loan is worth the effort, in the off chance that it is tested.

There are three main areas I’d try to remember; when students are required to begin repaying a loan, the term of the loan and the level of interest added.

  1. Threshold – On Plan 2, graduates were required to repay 9% on any income received over the threshold of £27,295. For the new Plan 5 (that came in from September 2023), graduates of this plan are required to repay 9% on any income received over a threshold of £25,000.
  2. Maximum Term – Plan 2 had a maximum loan term of 30 years. However, for Plan 5 this has been increased to 40 years.
  3. Interest Added – Interest up to RPI + 3% was added to the Plan 2 loan, with this changing to just RPI for Plan 5.


What’s the impact of these changes?

The changes above may seem fairly small, a slight lowering of the threshold and increase to the maximum term, but the impact is huge. On average for graduates on Plan 2, the state expects to pay 44p for every £1 borrowed. This is because given the maximum term, the majority of graduates would never fully repay their loans, with only 23% of graduates on the Plan 2 loan expected to fully clear their outstanding balance. In contrast, the state expects to only pay 19p for every £1 borrowed for graduates on the Plan 5 loan, with 52% of graduates expected to fully repay their loan within the extended 40 year term.

And it’s for this reason that I’d familiarise myself with the student loan ahead of the CII AF5 sitting, just in case! For more information, please read the article I wrote last year ahead of the changes.

I hope this article has been helpful, and best of luck with the exam!

Sam Patterson

Marie Patterson
Sam Patterson