Level 3 Certificate for Financial Advisers (CeFA ) Qualification Specification

Transcription

1 Level 3 Certificate for Financial Advisers (CeFA ) Qualification Specification The Institute of Financial Services is a division of ifs University College, a registered charity incorporated by Royal Charter.

2 RATIONALE A Qualification Specification is a concise description of a qualification offered by ifs University College and provides information to ifs stakeholders, including potential and current students. All qualifications offered by ifs University College are validated and regularly reviewed, based on information set down in each qualification specification. CONTENTS Page 1. Accreditation information 4 2. QCF Descriptors 5 3. Learning hours 5 4. Aims of the CeFA 5 5. Learning outcomes for the CeFA 6 6. Objectives of the CeFA 7 7. Structure of the CeFA 7 8. Entry requirements 8 9. Methods of study Assessment methodology of the CeFA Grading Assessment resits Learning resources Unit 1 specification Unit 1 learning outcomes / assessment criteria Unit 1 indicative content Unit 1 assessment methodology Unit 2 specification Unit 2 learning outcomes / assessment criteria Unit 2 indicative content Unit 2 assessment methodology Unit 3 specification Unit 3 learning outcomes / assessment criteria Unit 3 indicative content Unit 3 assessment methodology Unit 4 specification 22 2

3 Unit 4 learning outcomes / assessment criteria Unit 4 indicative content Unit 4 assessment methodology Unit 5 specification Unit 5 learning outcomes / assessment criteria Unit 5 indicative content Unit 5 assessment methodology Unit 6 specification Unit 6 learning outcomes / assessment criteria Unit 6 indicative content Unit 6 assessment methodology Unit 7 specification Unit 7 learning outcomes / assessment criteria Unit 7 indicative content Unit 7 assessment methodology 45 3

4 1. Accreditation information Qualification title ifs Level 3 Certificate for Financial Advisers (CeFA ) Ofqual qualification number 501 / 0845 / 1 Qualification level 3 European Qualifications Framework (EQF) level 4 Regulation start date 01 September 2010 Operational start date 01 September 2010 Offered in Assessment available in English Assessment available in Welsh Assessment available in Irish Sector subject area Purpose Sub-purpose England, Wales and Northern Ireland Yes No No 15.1 Accounting and Finance C. Prepare for employment. C2. Prepare for employment in a specific occupational area Total credits 32 Minimum credits at / above level 32 Minimum guided learning hours 320 Maximum guided learning hours 320 Overall grading type Assessment methods Qualification description Fail / Pass Multiple-choice examination The Certificate for Financial Advisers consists of seven mandatory units Age ranges 16 18; 19+ 4

5 2. Table 1 QCF Level 3 level descriptors DESCRIPTION SUMMARY KNOWLEDGE AND UNDERSTANDING APPLICATION AND ACTION AUTONOMY AND ACCOUNTABILITY Achievement at Level 3 reflects the ability to identify and use relevant understanding, methods and skills to complete tasks and address problems that, while well defined, have a measure of complexity. It includes taking responsibility for initiating and completing tasks and procedures as well as exercising autonomy and judgement within limited parameters. It also reflects awareness of different perspectives or approaches within an area of study or work. Use factual, procedural and theoretical understanding to complete tasks and address problems that, while well defined, may be complex and non-routine. Interpret and evaluate relevant information and ideas. Be aware of the nature of the area of study or work. Have awareness of different perspectives or approaches within the area of study or work. Address problems that, while well defined, may be complex and nonroutine. Identify, select and use appropriate skills, methods and procedures. Use appropriate investigation to inform actions. Review how effective methods and actions have been. Take responsibility for initiating and completing tasks and procedures, including, where relevant, responsibility for supervising or guiding others. Exercise autonomy and judgement within limited parameters. 3. Guided Learning Hours 3.1 The current recommended learning hours are 320 which, under Ofqual regulations, make CeFA a Certificate. 4. Aims of the CeFA 4.1 The aims of the CeFA are to: i. provide students with a challenging qualification covering the core disciplines of financial advice; ii. enable students to examine issues relating to financial advice; iii. enable students to apply specialised, current knowledge of the financial services market; iv. provide students with the tools and terminology necessary to analyse the financial services market and provide appropriate solutions and financial advice for consumers; v. provide students with the opportunity to evaluate the impact of the changing regulatory environment on issues relating to the financial services market and financial advice; 5

6 vi. support students understanding of ethical issues as applicable to financial advice; vii. enable students to explore recent developments in financial services products; viii. familiarise students with the links between theory and practice; and, ix. provide opportunities for students to develop the necessary skills and competencies to move on to further study or employment. 4.2 ifs University College is a leading provider of qualifications recognised by the Financial Conduct Authority as being appropriate for certain regulated functions. However it is the responsibility of individual students to be aware of and adhere to any additional regulatory requirements associated with these roles as set out in the FCA Handbook. Please refer to the Financial Conduct Authority for further information. 5. Learning outcomes for the CeFA 5.1 Knowledge and understanding elements of the CeFA will provide students with the ability to explain and analyse the: i. the environment of the financial services market with a focus on the range of protection and investment products which meet their clients needs and aspirations; ii. how a variety of financial services products and concepts may be applied to their clients requirements; iii. the current technical language, tools, methods and practices of financial advice to enable effective financial decision-making; and, iv. the financial services market and its need to respond to the constantly changing economic, legal and regulatory environment. 5.2 Subject-specific practical / professional elements of the CeFA will provide students with the skills to: i. analyse client information, products and services and reflect upon their suitability and effectiveness; and ii. understand how financial products respond to the drivers and implications of changes in the wider environment and how these changes affect their clients financial decisionmaking. 5.3 Intellectual skills developed by the CeFA will provide students with the ability to: i. locate, extract and analyse data from different financial sources; ii. utilise problem-solving and decision-making skills; iii. demonstrate numeracy skills, including the ability to manipulate financial and other numerical data; iv. utilise problem-solving and decision-making skills; and, v. critically evaluate data and information. 5.4 Transferable skills and personal qualities developed by the CeFA will provide students with the ability to: 6

7 i. use appropriate data and information from a range of sources; ii. learn independently and enhance skills of self-reflection and self-managed study; iii. structure and communicate ideas logically and coherently; and, iv. use appropriate communication and information technology skills. 6. Objectives of the CeFA 6.1 On completion of the CeFA qualification, students will be able to: i. understand the purpose and structure of the UK financial services industry; ii. understand the main financial asset classes and product types; iii. understand the main financial advice areas and the process of giving financial advice; iv. understand the UK taxation and social security system; v. identify the main aims and activities of the Financial Conduct Authority (FCA); vi. identify how other non-tax laws and regulations impact upon firms and the process of advising clients; vii. identify the different types of investment, risk and other issues that affect investment planning; viii. understand the key features of different asset classes and product types; ix. understand the types, purpose and scope of financial protection; x. understand the main aims, strategies and tax implications of retirement planning; xi. understand the key types and features of pension products; xii. understand the regulations and legal framework that governs UK financial advice; and, xiii. Identify suitable products and financial services solutions for consumers with specific circumstances. 6.2 As well as developing knowledge, the CeFA assists in developing the ability to: i. analyse clients circumstances and provide suitable financial advice; ii. analyse and evaluate data and information; iii. develop core personal skills including communication, numeracy and IT; iv. formulate appropriate responses to resolve defined problems; v. convey data and information clearly, concisely and accurately; vi. develop skills in examination technique; and, vii. apply and build on previous learning and experience. 7. Structure of the CeFA 7.1 CeFA is made up of seven mandatory units which need to be successfully completed in order for the student to achieve the certificate. i. Unit 1: Introduction to Financial Services Environment and Products (5 credits / 50 GLH) ii. Unit 2: UK Financial Services and Regulation (3 credits / 30 GLH) iii. Unit 3: Principles of Investment (5 credits / 50 GLH) 7

8 iv. Unit 4: Investment Products (5 credits / 50 GLH) v. Unit 5: Retirement Planning (5 credits / 50 GLH) vi. Unit 6: Financial Protection (5 credits / 50 GLH) vii. Unit 7: Assessment of Investment Advice Knowledge (4 credits / 40 GLH) 8. Entry requirements 8.1 There are no specified entry requirements. 9. Methods of study 9.1 CeFA is delivered via distance learning. 9.2 It offers a flexible and integrated approach to learning and assessment. 9.3 Materials and additional information are available by access to my ifslearning. 10. Assessment methodology of the CeFA 10.1 All units will be assessed using multiple choice questions (MCQs) made up of the following components: i. Units 1, 2, 3, 4, 5 and 6: 50 standalone MCQs; ii. Unit 7: 6 case studies each with 10 linked MCQs A total of 360 marks are available from all units. 11. Grading 11.1 The qualification will be graded fail / pass only. To achieve a pass, students must achieve a mark of 70% The unit related feedback is as follows: Unit related feedback % of correct answers Fail 0 69 Pass Merit Distinction Assessment resits 12.1 There are no restrictions on the number of times a student can resit a unit they have failed Students may resit the unit in accordance with the published ifs policies. 8

9 13. Learning resources 13.1 Students will be provided with the following learning resources: i. hard copy versions of learning materials; ii. online access via my ifslearning to learning materials and to ifs KnowledgeBank (virtual library); and iii. unit syllabuses; 13.2 In addition to the study texts supplied, students can purchase alternative learning support, provided in the form of: Specimen examination papers Revision notes An online support service A Competence Development Tool (CDT) 14. Module 1 UK Financial Regulation (UKFR) 14.1 Unit 1 specification Unit title Ofqual unit reference number Introduction to the Financial Services Environment and Products (ITFS) L/501/8715 Unit level 3 Guided learning hours 50 Unit credit value 5 Unit aims i. This unit introduces students to the financial services industry by focusing on the structure of the UK financial services industry and the interaction between the types of financial services products and clients requirements. ii. Students will gain an understanding of the main asset classes and features of financial services products. iii. Students will gain an appreciation of the UK tax and benefits system. iv. Students will gain an appreciation of the main financial advice areas Unit 1 learning outcomes / assessment criteria 9

10 The learner when awarded credit for this unit will: 1. Understand the purpose and structure of the UK financial services industry. 2. Understand the main financial asset classes. 3. Understand the main financial services product types and their functions. 4. Understand the main financial advice areas. 5. Understand the process of giving financial advice. 6. Understand the basic legal concepts relevant in financial advice. 7. Understand the UK taxation and social security systems. 8. Understand the impact of inflation, interest rate volatility and other relevant socio-economic factors on Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Explain the function of the financial services industry in the economy. 1.2 Describe the main institutions / organisations. 1.3 Explain the role of the EU and of the UK government. 1.4 Describe the purpose and position of clearing and settlement organisations. 2.1 Describe the main asset classes with their characteristics. 3.1 Explain the differences and similarities of the main financial services products. 4.1 Explain budgeting when used for individuals. 4.2 Explain the different needs for protection. 4.3 Describe the need for borrowing and implications for debt. 4.4 Describe the need for investment, saving and retirement planning. 4.5 Explain the main issues surrounding estate and tax planning. 5.1 Describe the nature of the client relationship. 5.2 Describe the information required from consumers and methods of obtaining it. 5.3 Explain how to assess affordability and suitability. 5.4 Describe the importance of communication skills in giving advice. 5.5 Explain the importance of monitoring and review of consumers circumstances. 6.1 Explain the differences and similarities of Legal persons. 6.2 Explain the nature of Contract and the capacity to contract. 6.3 Describe the principles of Agency. 6.4 Explain the types of ownership in real estate. 6.5 Explain the differences and similarities of enduring powers of attorney and lasting powers of attorney. 6.6 Explain the implications for the consumer of insolvency, bankruptcy, and Individual Voluntary Arrangements (IVAs). 7.1 Describe the different forms of tax and their implications for the consumer. 7.2 Explain the different state benefits. 8.1 Explain the definition of inflation. 8.2 Explain the impact of socio-economic factors and how they affect the affordability, suitability and performance of 10

11 The learner when awarded credit for this unit will: personal financial plans. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: financial products in both the long and short term Unit 1 Learning outcome (LO) 1. Understand the purpose and structure of the UK financial services industry. 2. Understand the main financial asset classes. 3. Understand the main financial services product types and their functions. 4. Understand the main financial advice areas. U1.1 The function of the financial services industry in the economy transferring funds between individuals, businesses and government risk management U1.2 The main institutions/organisations markets, retail institutions, wholesale institutions, credit unions U1.3 The role of the EU and of the UK government regulation, taxation, economic and monetary policy, provision of welfare and benefits U1.4 The purpose and position of clearing and settlement organisations U2.1 Cash deposits and money market instruments U2.2 Government securities and corporate bonds fixed interest and index linked U2.3 Equities U2.4 Real estate residential and commercial U2.5 Commodities U2.6 Foreign exchange U3.1 Direct investment cash, government securities and corporate bonds, equities and property, commercial money market instruments U3.2 Collective investments structure, tax and charges OEICs/unit trusts, investment trusts, life assurance contracts, offshore funds U3.3 Derivatives their structure and purpose U3.4 Mortgages and other loans personal and commercial U3.5 Pensions U3.6 Structured products U3.7 Protection products life and general U4.1 Budgeting U4.2 Protection U4.3 Borrowing and debt U4.4 Investment and saving U4.5 Retirement planning U4.6 Estate planning U4.7 Tax planning 11

12 5. Understand the process of giving financial advice. 6. Understand the basic legal concepts relevant in financial advice. 7. Understand the UK taxation and social security systems. U5.1 The nature of the client relationship, confidentiality, trust and consumer protection U5.2 The information required from consumers and methods of obtaining it U5.3 Factors determining how to match solutions with consumer needs and demands U5.4 How to assess affordability and suitability U5.5 The importance of communication skills in giving advice and how to adapt advice to customers with different capacities and needs U5.6 The importance of monitoring and review of consumers circumstances U5.7 Information for consumers and when it should be provided (outline only) U6.1 Legal persons individuals, wills, intestacy, personal representatives (and administration of estates), trustees, companies, limited liabilities, partnerships U6.2 Contract, capacity to contract U6.3 Agency U6.4 Real estate, personal property and joint ownership U6.5 Power of attorney, enduring power of attorney and lasting power of attorney U6.6 Insolvency and bankruptcy, Individual Voluntary Arrangements (IVAs), CVAs U7.1 Concept of residency/domicile U7.2 UK Income tax system liability to income tax, allowances, reliefs, rates, grossing up interest and dividends, employed and self-employed income, selfassessment deadlines, priorities for taxing different classes of income, gift aid, Give As You Earn U7.3 Capital gains tax liability to CGT, disposals, death, deductions, losses, main reliefs and exemptions, calculation of chargeable gains U7.4 Inheritance tax liability to IHT, main exemptions, calculation of IHT liabilities U7.5 Corporation tax U7.6 Stamp duty land tax and stamp duty reserve tax on securities U7.7 VAT and Insurance Premium Tax U7.8 Withholding tax U7.9 National insurance U7.10 Social security benefits 12

13 U8.1 Definition of inflation, deflation, disinflation 8. Understand the impact of inflation, interest rate volatility and other relevant socio-economic factors on personal financial plans. U8.2 The difference between fixed and variable interest rates and their impact U8.3 The impact of socio-economic factors and how they affect the affordability, suitability and performance of financial products in both the long and short term 14.4 Unit 1 assessment methodology i. The assessment of Unit 1 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks Unit 2 specification Unit title Ofqual unit reference number UK Financial Services and Regulation (UKFS) R/501/8716 Unit level 3 Guided learning hours 30 Unit credit value 3 Unit aims i. This unit introduces student to the regulation of UK financial services. ii. Students will gain an understanding of the requirements of the regulator and other laws relating to the provision of advice. iii. Students will understand the features of the regulator s Conduct of Business Rules and how they apply to clients. iv. Students will gain an appreciation of Anti-Money Laundering regulations. v. Students will understand the rules relating to regulated complaints and compensation. vi. Students will gain an appreciation of the Data Protection Act Unit 2 learning outcomes / assessment criteria 13

14 The learner when awarded credit for this unit will: 1. Know the main aims and activities of the Financial Conduct Authority (FCA) and its approach to ethical conduct by firms and individuals. 2. Know how other non-tax laws and regulations are relevant to firms and to the process of advising clients. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Identify the FCA s statutory objectives, roles, activities and powers. 1.2 Outline the FCA s principles for businesses and approved persons. 1.3 Identify the approach to, and requirements for, treating customers fairly. 1.4 Identify arrangements, systems and controls for senior managers. 1.5 Outline the fit for purpose test for approved persons. 1.6 Outline the FCA s approach to the prevention of financial crime. 2.1 Outline the relevance of other non-tax laws. 3. Know the role of oversight groups. 3.1 Identify the role of internal and external auditors, trustees and compliance function. 4. Understand the FCA s approach to regulating firms and individuals. 5. Understand how the FCA s rules affect the control structures of firms and their relationship with the FCA. 6. Understand how the FCA s Conduct of business Rules apply to the process of advising clients / customers. 7. Understand how the Anti-money Laundering regulations apply to dealings with clients / customers. 8. Understand the main features of the rules for dealing with 4.1 Describe the FCA s approach to the authorisation of firms, regulated activities and regulated investments. 4.2 Explain the requirement for capital adequacy. 4.3 Explain FCA supervision and the risk based approach. 4.4 Describe the FCA s powers of discipline and enforcement. 5.1 Describe the different types of approved persons and controlled functions. 5.2 Explain the FCA s rules and guidance surrounding reporting and record keeping. 5.3 Explain the FCA s rules and guidance training and competence rules. 6.1 Describe the regulatory rules for retail investment advice (COB). 6.2 Describe the regulatory rules for mortgage advice (MCOB) 6.3 Describe the regulatory rules for general insurance (ICOB) 7.1 Describe the main money laundering regulations and offences, the implications of the Terrorism Act 2000, and the Proceeds of Crime Act Describe the role of the Financial Action Task Force and the Serious Organised Crime Agency (SOCA). 8.1 Explain the consumer s rights and remedies. 8.2 Describe the firms internal complaints procedures. 14

15 The learner when awarded credit for this unit will: complaints and compensation. 9. Understand how the Data Protection Act 1998 affects the provision of financial advice. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 8.3 Describe the main aims of the Financial Ombudsman Service (FOS). 8.4 Describe the main aims of the Financial Services Compensation Scheme (FSCS). 9.1 Explain the main requirements and powers of the Data Protection Act Unit 2 Learning outcome (LO) 1. Know the main aims and activities of the Financial Conduct Authority (FCA) and its approach to ethical conduct by firms and individuals. 2. Know how other non-tax laws and regulations are relevant to firms and to the process of advising clients. 3. Know the role of oversight groups. 4. Understand the FCA s approach to regulating firms and individuals. K1.1 Demonstrate a knowledge of the FCA s statutory objectives, roles, activities and powers K1.2 Demonstrate a knowledge of the FCA s principles for businesses and approved persons how they reflect the need for ethical behaviour by firms and approved persons, FCA guidance K1.3 Demonstrate a knowledge of the approach to, and requirements for, treating customers fairly K1.4 Demonstrate a knowledge of the arrangements, systems and controls for senior managers K1.5 Demonstrate a knowledge of the fit and proper test for approved persons K1.6 Demonstrate a knowledge of the prevention of financial crime K2.1 Demonstrate a knowledge of the Office of Fair Trading and the Consumer Credit legislation K2.2 Demonstrate a knowledge of the Competition Commission K2.3 Demonstrate a knowledge of the Pensions Regulator K2.4 Demonstrate a knowledge of the Unfair Contract Terms; Advertising Standards Authority; Banking Code K2.5 Demonstrate a knowledge of EU directives K3.1 Demonstrate a knowledge of the role of internal and external auditors, trustees and compliance function U1.1 Understand the authorisation of firms, regulated activities & regulated investments, firms status U1.2 Understand capital adequacy and liquidity U1.3 Understand FCA supervision and the risk based approach 15

16 5. Understand how the FCA s rules affect the control structures of firms and their relationship with the FCA. 6. Understand how the FCA s Conduct of business Rules apply to the process of advising clients / customers. 7. Understand how the Anti-money Laundering regulations apply to dealings with clients / customers. U1.4 Understand discipline and enforcement including notification requirements U1.5 Understand regulatory developments eg Retail Distribution review (RDR) U2.1 Understand approved persons and controlled functions U2.2 Understand reporting and record keeping U2.3 Understand training and competence rules U3.1 Understand advertising and financial promotion rules U3.2 Understand the types of client U3.3 Understand the information about the firm's services, including client agreements U3.4 Understand the status of advisers and status disclosure to customers, specific rules for independent financial advisers and whole of market advisers U3.5 Understand identifying client circumstances and needs U3.6 Understand suitability of advice U3.7 Understand execution only, non-advised sales and statements of demands and needs U3.8 Understand charges and commissions U3.9 Understand cooling off and cancellation U3.10 Understand product disclosure and risk disclosure statements U3.11 Understand simplified advice on the stakeholder suite of products U3.12 Understand regulatory rules for mortgage advice (MCOB) status disclosure, initial disclosure document, charges, suitability, product disclosure, cancellation U3.13 Understand regulatory rules for general insurance advice (ICOB) status disclosure, initial disclosure document, charges, suitability, product disclosure, cancellation U4.1 Understand the definition of financial crime and proceeds of crime U4.2 Understand money laundering regulations and offences, the Terrorism Act 2000, Proceeds of Crime Act 2002 U4.3 Understand client identification procedures U4.4 Understand record keeping requirements U4.5 Understand reporting procedures, U4.6 Understand training requirements 16

17 U4.7 Understand enforcement U4.8 Understand the role of the Financial Action Task Force and the Serious Organised Crime Agency (SOCA) U5.1 Understand consumer rights and remedies, including awareness of their limitations 8. Understand the main features of the rules for dealing with complaints and compensation. 9. Understand how the Data Protection Act 1998 affects the provision of financial advice. U5.2 Understand firms internal complaints procedures U5.3 Understand the Financial Ombudsman Service (FOS) U5.4 Understand the Financial Services Compensation Scheme (FSCS) U5.5 Understand the Pension Ombudsman U6.1 Understand the definitions in the Data Protection Act U6.2 Understand the data protection principles U6.3 Understand the enforcement of the Data Protection Act 14.8 Unit 2 assessment methodology i. The assessment of Unit 2 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks. 15. Module 2 Investments and Risk (INVR) 15.1 Unit 3 specification Unit title Ofqual unit reference number Principles of Investment (PINV) H/501/8722 Unit level 3 Guided learning hours 50 Unit credit value 5 Unit aims i. This unit introduces student investment. ii. Students will gain an understanding of the macroeconomic factors that affect investment returns. iii. Students will gain an understanding of the basic principles of taxation applying to the investments of UK resident and domiciled individuals. iv. Students will gain an understanding of the role of ethical investment and socially responsible investment in financial advice and charitable giving. v. Students will gain an understanding of how 17

18 investment returns are related to investment risk and how that risk is measured. vi. Students will gain an understanding of the risks faced by investors and how an investor s risk profile is determined. vii. Students will gain an understanding of the importance of asset allocation in the investment process. viii. Students will gain an understanding of how other issues affect investment planning. ix. Students will gain an understanding of tax planning strategies and tax calculation rules and procedures. x. Students will gain an understanding of the importance of keeping up-to-date with trends and changes in the legal framework for providing advice. xi. Students will be able to demonstrate an ability to analyse consumers circumstances and suitable investment products, taking account of any existing arrangements 15.2 Unit 3 learning outcomes / assessment criteria Learning outcome (LO) The learner when awarded credit for this unit will: 1. Understand the macro economic factors that affect investment returns. 2. Understand the basic principles of taxation applying to the investment of UK resident and domiciled individuals. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Explain the main long term UK socio-economic trends of ageing population, rising living standards, growth of the service sector and other changing patterns of the UK economy. 1.2 Explain the role of the government and central banks in fiscal and monetary policy. 1.3 Explain what is meant by money, inflation, deflation, disinflation, interest rates, the link between money supply and inflation, measuring money supply. 1.4 Explain the balance of payments, capital and current account, exchange rates and the importance of the balance of payments. 1.5 Describe economic and financial cycles. 1.6 Explain the role of financial investment in the economy. 1.7 Describe key economic indicators. 2.1 Explain the principles of Income tax. 2.2 Explain the principles of Capital Gains Tax. 2.3 Explain Stamp Duty Land Tax and Stamp Duty Reserve Tax on securities. 2.4 Describe corporation tax, as it applies to investments. 18

19 The learner when awarded credit for this unit will: 3. Understand the role of socially responsible investment of UK resident and domiciled individuals. 4. Understand how investment returns are related to investment risk. 5. Understand how investment risk is measured. 6. Understand the risks faced by investors and how an investor s risk profile is determined. 7. Understand the importance of asset allocation in the investment process. 8. Understand how other issues affect investment planning. 9. Understand tax planning strategies, tax calculation rules and procedures. 10. Understand the importance of keeping up to date with trends and changes in the legal framework for giving advice. 11. Analyse consumers circumstances and suitable investment products. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 3.1 Describe what is meant by socially responsible investment. 3.2 Explain what is meant by ethical investment. 4.1 Explain the significance of inflation on investment returns. 4.2 Explain the effects of compound interest. 4.3 Describe the time value of money. 4.4 Discuss the varying investment returns from the main different asset classes. 5.1 Explain the bases used for measuring risk. 5.2 Explain the bases used for measuring total return. 5.3 Describe investment portfolio planning and reducing risk through diversification. 6.1 Describe the main types of risk for investors. 6.2 Describe the methods of assessing risk profile. 7.1 Explain the importance of asset allocation, diversification and correlation for achieving objectives and reducing risk. 7.2 Explain the need for review of asset allocation. 8.1 Explain how charges affect various aspects of investment planning. 8.2 Explain the difference between active and passive investment management. 8.3 Describe how alternative forms of investment can be used in investment planning. 9.1 Describe basic investment tax planning. 9.2 Explain factors to account for in making personal tax calculations. 9.3 Describe the criteria for selecting a tax planning strategy. 9.4 Explain the rules and procedures relating to personal tax calculations. 9.5 Explain the legal requirements applying to confidentiality and disclosure of personal tax information Explain the statutory, regulatory and legal developments affecting investment advice Evaluate factors shaping consumers circumstances Assess affordability and suitability of investment products. 19

20 15.3 Unit 3 Learning outcome (LO) 1. Understand the macro economic factors that affect investment returns. 2. Understand the basic principles of taxation applying to the investment of UK resident and domiciled individuals. 3. Understand the role of socially responsible investment of UK resident and domiciled individuals. 4. Understand how investment returns are related to investment risk. 5. Understand how investment risk is measured. U1.1 Main long term UK socio-economic trends ageing population, rising living standards, growth of the service sector and other changing patterns of the UK economy, productivity of capital and labour, wealth and income distribution U1.2 The global context - international markets, globalisation of trade and finance, European economic and monetary union U1.3 The role of government and central banks fiscal and monetary policy U1.4 Money, inflation, deflation, disinflation, interest rates, the link between money supply and inflation, measuring money supply U1.5 Balance of payments capital and current account, exchange rates, the importance of the balance of payments U1.6 Economic and financial cycles national income, global influences, the main stages of economic and stock market cycles, longer term growth trends U1.7 The role of financial investment in the economy primary markets: how investment markets introduce new funds to business and the government. Secondary markets: how markets enable investors to adjust their investments to suit their needs U1.8 Key economic indicators gross domestic product (GDP), retail prices index (RPI) and the consumer prices index (CPI), public sector net cash requirement, volume of fixed investment, volume of consumer spending, balance of payments, money stock, foreign exchange rates, bank rate, gilt yields, stock market indices U2.1 Income tax liability to income tax, allowances, reliefs, rates, grossing up interest and dividends, taxing different classes of income U2.2 Capital gains tax liability to CGT, disposals, death, deductions, losses, main reliefs and exemptions, basic calculation of chargeable gains U2.3 Stamp Duty Land Tax and Stamp Duty Reserve Tax on securities U2.4 Corporation tax, as it applies to investments U3.1 Socially responsible investment U3.2 Ethical investment U3.3 Possible implications for investment performance U4.1 Inflation and investment returns the difference between nominal and real returns U4.2 The effects of compound interest U4.3 The time value of money U4.4 Varying investment returns from the main different asset classes risk-free rates of return & the risk premium U4.5 Measuring risk volatility, the significance of standard deviation as a measure of volatility, the importance and limitations of past performance data 20

21 6. Understand the risks faced by investors and how an investor s risk profile is determined. 7. Understand the importance of asset allocation in the investment process. 8. Understand how other issues affect investment planning. 9. Understand tax planning strategies, tax calculation rules and procedures. 10. Understand the importance of U8. keeping up to date with trends and changes in the legal framework for giving advice. U4.6 Measuring total return and the significance of beta and alpha U4.7 Investment portfolio planning and reducing risk through diversification systemic and non-systemic risk, diversification across shares, sectors, markets and asset classes, correlation within and between asset classes U5.1 Main types of risk for investors U5.2 Objective factors: timescale, age, commitments, wealth, life cycle U5.3 Subjective factors: attitudes and experiences U5.4 Methods of assessing risk profile U5.5 Gearing - advantages and risks associated with this strategy U6.1 The importance of; asset allocation, diversification, correlation achieving objectives, reducing risk, need for review U6.2 Analysing the underlying composition of funds - managed funds, with profits funds and other collective investments U6.3 Sample asset allocations different types of investors U7.1 Comparing charges, their impact and relevance, reduction in yield including hidden charges, illustrations U7.2 Active as against passive investment management U7.3 Paying off the mortgage as against other investments, what should be the relationship between investing and borrowing? U7.4 Alternative investments (eg gold, art, antiques) past performance, advantages and drawbacks U8.1 Basic investment tax planning use of personal allowances, spouses personal allowances, children s tax position, pension contributions, use of ISAs, use of capital gains tax exemptions, tax deferral, use of life assurance bonds, use of pension vehicles, inheritance tax U8.2 Factors to account for in making personal tax calculations: basic income tax and capital gains tax computations personal allowances, non-savings income, savings income, dividends, life assurance bond profits, chargeable gains U8.3 Criteria for selecting a tax planning strategy impact of new investments, understanding tax brackets, age allowance U8.4 Rules and procedures relating to personal tax calculations U8.5 How to perform tax calculations U8.6 Legal requirements applying to confidentiality and disclosure of personal tax information U9.1 Statutory, regulatory and legal developments affecting investment advice 21

22 11. Analyse consumer s circumstances and suitable investment products. AN1.1 Factors shaping consumers circumstances AN1.2 How to identify and analyse risk profiles and exposure AN1.3 How to assess affordability and suitability AN1.4 Methods of identifying and reviewing suitable product solutions AN1.5 How to assess the impact of new solutions on existing arrangements 15.4 Unit 3 assessment methodology i. The assessment of Unit 3 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks. b. There are no sectional pass / fails for this assessment, a pass is 70% of the total 100 marks available Unit 4 specification Unit title Ofqual unit reference number Investment products (INVP) K/501/8723 Unit level 3 Guided learning hours 50 Unit credit value 5 Unit aims i. This unit introduces student investment products. ii. Students will gain an understanding of the different asset classes and their key features. iii. Students will gain an understanding of the different product types and their key features. iv. Students will be able to demonstrate an ability to apply suitable investment product solutions to specific consumers circumstances Unit 4 learning outcomes / assessment criteria Learning outcome (LO) The learner when awarded credit for this unit will: 1. Understand cash deposits and their key features. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Describe the main features of cash deposits. 1.2 Describe the main types of deposit account. 22

23 Assessment criteria (AC) The learner when awarded credit for Assessment of the LOs will require a learner to this unit will: demonstrate that they can: 1.3 Explain the taxation of deposit interest. 1.4 Explain the taxation of deposit interest. 1.5 Describe National Savings and Investment products. 2.1 Describe the main characteristics of fixed interest investments. 2. Understand bonds, Government 2.2 Explain investment returns. securities, and their key features. 2.3 Explain the main features of gilts. 2.4 Describe the main features of index-linked gilts. 2.5 Describe the main features of corporate bonds. 3.1 Describe the main types of shares. 3.2 Describe the characteristics of equity-based investment. 3.3 Explain the relevance of past performance. 3.4 Describe the different stock market indices. 3. Understand equities and their key 3.5 Explain how dealing costs and stamp duty reserve tax features. impact on the sale of shares. 3.6 Explain the taxation of dividends. 3.7 Explain the main features and uses of derivatives. 3.8 Describe the employee share schemes. 4.1 Describe the characteristics of commercial and residential 4. Understand residential and property investment. commercial property and their key 4.2 Explain the relevance of past performance. features. 4.3 Describe the transaction costs. 5.1 Explain the structure of OEICs, ICVCs (Investment companies with variable capital) and unit trusts. 5.2 Describe the different UK fund classifications. 5.3 Describe the charges and pricing in relation to OEICs and 5. Understand OEICs and unit trusts unit trusts. and their key features. 5.4 Explain the main features of taxation, for OEICs and unit trusts. 5.5 Describe offshore funds. 5.6 Describe structured investment funds. 6.1 Describe the basic structure and characteristics of investment trusts. 6.2 Describe the main different classes of shares. 6.3 Explain dealing, pricing, premiums and discounts, net 6. Understand investment trusts and asset value. their key features. 6.4 Explain gearing. 6.5 Explain the reference of past performance of investment trusts. 6.6 Explain the taxation of investment trusts. 7. Understand Individual savings 7.1 Explain the ISA structure. 23

24 The learner when awarded credit for this unit will: Accounts (ISAs) and their key features. 8. Understand UK and offshore life assurance company products and their key features. 9. Apply suitable investment product solutions, to specific consumers circumstances. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 7.2 Describe the charging structure for ISAs. 7.3 Explain tax treatment. 7.4 Explain the eligibility required for ISAs. 7.5 Describe the restrictions and rules relating to transfers of ISAs 7.6 Describe the effect of the death of the investor. 8.1 Describe the structure and characteristics of life assurance bonds. 8.2 Describe the features of qualifying policies. 8.3 Explain traded endowments and traded life policies. 8.4 Describe the charges relating to life assurance products. 8.5 Explain the taxation of life assurance products. 8.6 Describe the choice between life assurance bonds and OEICs / unit trusts. 9.1 Assess the range of solutions available to consumer needs and demands. 9.2 Assess the criteria for matching solutions to consumer needs and demands. 9.3 Evaluate factors influencing the way in which recommendations are presented. 9.4 Assess how consumer rights and the regulatory requirements apply to the provision of investment advice Unit 4 Learning outcome (LO) 1. Understand cash deposits and their key features. 2. Understand bonds, Government securities, and their key features. U1.1 Cash deposits U1.1.1 Characteristics and past performance liquidity, rates of interest, real returns, institutions, statutory protection, risk factors, foreign currency deposits U1.1.2 Main types of deposit account instant access, notice and fixed rate, including Child Trust Funds, credit unions U1.1.3 Taxation of deposit interest savings income, tax deducted at source, election to be paid gross, offshore accounts U1.1.4 ISAs U1.1.5 National Savings and Investment products U1.1.6 Sharia compliant investments U1.2 Government securities and corporate bonds and Eurobonds U1.2.1 Main characteristics of fixed interest investments nominal value and market price, coupon, redemption date U1.2.2 Investment returns running yields, yields to redemption, capital returns, volatility and risk, 24

25 3. Understand equities and their key features. 4. Understand residential and commercial property and their key features. yield curves U1.2.3 Gilts government guarantee, short, medium and long dated gilts, past performance, risk U1.2.4 Index-linked gilts returns on income and capital, risk U1.2.5 Corporate bonds borrowers risk ratings and effects on yields, past performance U1.2.6 Other types of bonds permanent interest bearing shares, perpetual subordinated bonds, zero coupon bonds, deep discounted bonds, local authority bonds, convertible loan stock U1.2.7 Dealing costs of purchases and sales U1.2.8 Taxation of government securities and corporate bonds interest and capital gains/losses U1.3 Equities - shares and issues U1.3.1 Main types of shares ordinary and preference U1.3.2 Characteristics of equity-based investment - individual company performance and main factors that affect company profits and share values, size of company and market liquidity, sectors and markets U1.3.3 Measuring performance price earnings ratio (PE), dividend yield, dividend cover, borrowing, net assets U1.3.4 Market behaviour what makes markets fluctuate, fundamental analysis and market psychology U1.3.5 Past performance growth, dividends and volatility U1.3.6 Stock market indices main UK and overseas indices U1.3.7 Dealing costs, stamp duty reserve tax U1.3.8 Taxation of dividends U1.3.9 Derivatives futures and options, main features and uses contracts for difference, covered warrants U Employee share schemes and incentives U AIM shares, Enterprise Investment Schemes, unlisted securities, Venture capital trusts, private equity structure, tax characteristics, past performance in terms of risk and returns U1.4 Property residential and commercial U1.4.1 Characteristics of commercial and residential property investment returns from rent and capital growth, demand, risks, quality of tenants, occupancy levels, liquidity, depreciation and maintenance costs, basis of valuation U1.4.2 Past performance differences between commercial and residential property (buy to let), key determinants of past investment returns, volatility, income and capital returns U1.4.3 Borrowing its effect on risk and returns U1.4.4 Transaction costs including commissions, fees and stamp duty land tax U1.4.5 Taxation issues taxation of rental income, interest relief, capital gains tax U1.4.6 Indirect property investment vehicles unit trusts/oeics, property shares, life assurance property bonds, offshore funds, Real Estate Investment Trusts (REITs) 25

26 5. Understand OEICs and unit trusts and their key features. 6. Understand investment trusts and their key features. 7. Understand Individual savings Accounts (ISAs) and their key features. 8. Understand UK and offshore life assurance company products and their key features. U2.1 OEICs and unit trusts U2.1.1 Structure of OEICs (investment companies with variable capital ICVCs) and unit trusts the common characteristics of funds and the main differences, relative merits of direct investment and investment in funds including Child Trust Funds U2.1.2 Range of funds different UK fund classifications, hedge funds, limited issue funds, tracker funds, multi manager, fund of funds, absolute return funds U2.1.3 Charges and pricing initial and annual charging structures, single and bid/offer pricing, dilution levies, total expense ratios U2.1.4 Dealing in funds and UCITS U2.1.5 Taxation UK and offshore, taxation within the funds, taxation of UK individual and trustee investors U2.1.6 Offshore funds tax structure of both the fund and the UK investor, recognition by the FCA U2.1.7 Structured products equity index-based and equitybased growth and income funds U2.2 Investment trusts U2.2.1 Basic structure and characteristics closed ended structure, differences between closed and other funds, range of investment trusts, including Child Trust Funds U2.2.2 Main different classes of shares ordinary shares, income shares, zero dividend shares, capital shares U2.2.3 Dealing, pricing, premiums and discounts, net asset value, total expense ratios U2.2.4 Gearing advantages and drawbacks in terms of risk and flexibility U2.2.5 Past performance of investment trusts risk and returns U2.2.6 Taxation dividends and capital gains of investment trusts and for the investors who own them U2.3 Individual savings accounts (ISAs) U2.3.1 ISA structure components: stocks and shares, cash, annual investment limits U2.3.2 Charging initial and annual charges for direct investments and collectives U2.3.3 Tax treatment interest, dividends, mixed bond funds, capital gains, time limit for tax regime U2.3.4 Eligibility age, residence U2.3.5 Transfers restrictions and rules U2.3.6 Effect of the death of the investor U2.4 UK and offshore life assurance company products U2.4.1 Structure and characteristics of life assurance bonds unit-linked funds, with profit bonds, guaranteed income and growth bonds U2.4.2 Qualifying policies maximum investment plans and other endowments U2.4.3 Traded endowments and traded life policies U2.4.4 Charges initial and annual U2.4.5 Taxation UK and offshore, within the fund and 26

27 9. Apply suitable investment product solutions, to specific consumers circumstances. for the investor U2.4.6 The choice between life assurance bonds and OEICs/unit trusts U2.4.7 Purchased life annuities U2.4.8 Friendly society products A1.1 The range of solutions available to suit different types of circumstance A1.2 The criteria for matching solutions to consumer needs and demands A1.3 Factors influencing the way in which recommendations are presented including required documentation A1.4 How to check consumers understanding of recommendations A1.5 Consumer rights and the regulatory requirements apply to the provision of investment advice 15.8 Unit 4 assessment methodology i. The assessment of Unit 4 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks. b. There are no sectional pass / fails for this assessment, a pass is 70% of the total 100 marks available. 16. Module 3 Retirement Planning and Protection (RTPL) 16.1 Unit 5 specification Unit title Ofqual unit reference number Financial Protection (PROT) T/501/8725 Unit level 3 Guided learning hours 50 Unit credit value 5 Unit aims i. This unit introduces student to protection. ii. Students will gain an understanding of the purpose and scope of financial protection and how the main types of state benefit and existing protection arrangements have an impact on protection planning. iii. Students will gain an understanding of the main types of life assurance policy, their functions, how they are arranged and the tax rules and the use of life assurance in mitigating inheritance tax and estate 27

28 planning. iv. Students will gain an understanding of the use of trusts in life assurance. v. Students will gain an understanding of the main types of income protection insurance policies, their functions, how they are arranged and the tax rules. vi. Students will gain an understanding of the main types of critical illness insurance policies, their functions, how they are arranged and the tax rules. vii. Students will gain an understanding of the main features and functions of mortgage payment protection insurance (MPPI) and accident, sickness and unemployment (ASU) insurance. viii. Students will gain an understanding of the main features and functions of personal accident insurance. ix. Students will gain an understanding of the main features and functions of long-term care insurance and the context in which it is used. x. Students will gain an understanding of the main types of medical insurance and their uses. xi. Students will gain an understanding of the main needs for business insurance protection and how they can be met. xii. Students will be able to demonstrate an ability to analyse consumers circumstances and suitable protection products, taking account of any existing arrangements Unit 5 learning outcomes / assessment criteria Learning outcome (LO) The learner when awarded credit for this unit will: 1. Understand the purpose and scope of financial protection. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Describe the main types of protection cover. 1.2 Explain the main areas of need for protection. 1.3 Explain the main impact of divorce and relationship breakdown on policies and changing needs. 1.4 Explain the role of employment and pension-based protection benefits. 1.5 Discuss the regulatory issues regarding investment policies, non investment long-term care policies and other non-investment insurance policies. 1.6 Describe the relevance of state benefits to the provision of 28

29 The learner when awarded credit for this unit will: 2. Understand the main types of life assurance policy and estate planning. 3. Understand the use of trusts in life assurance. 4. Understand the main types of income protection insurance policies. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: protection policies. 1.7 Describe the features of the main state benefits. 1.8 Describe individual and family priorities in life and health protection. 1.9 Explain the importance of determining existing protection arrangements and their consequences for protection planning. 2.1 Explain the basic principles of life assurance. 2.2 Describe the main types of life assurance policies. 2.3 Describe the mechanics of life assurance policies. 2.4 Explain what is meant by policy proceeds. 2.5 Explain the taxation of life assurance policies. 2.6 Describe special aspects of life assurance policies. 2.7 Explain different kinds of family life assurance protection needs. 2.8 Explain the principles of wills, probate and intestacy. 2.9 Describe the use of inheritance tax planning Calculate inheritance tax computations for individuals Explain the use of inheritance tax planning in relation to the pre-owned assets legislation Explain the role of life assurance in estate planning. 3.1 Explain the nature of trusts. 3.2 Explain how trusts are set up and the main roles of settlors, trustees and beneficiaries. 3.3 Describe how to choose trustees. 3.4 Describe the main types of trust. 3.5 Explain why trusts are used. 3.6 Describe the uses of life assurance policies under trust. 3.7 Explain the tax issues of policies under trust. 4.1 Explain the need for income protection insurance. 4.2 Describe the main product features of income protection. 4.3 Explain what is meant by proposals and underwriting. 4.4 Explain what is meant by claims and conditions. 4.5 Describe the taxation of individual and group policies. 4.6 Describe the state benefits for illness and incapacity. 4.7 Explain what is meant by waiver of premium. 4.8 Explain what is meant by group policies and employer policies. 29

30 The learner when awarded credit for this unit will: 5. Understand the main types of critical illness insurance policies. 6. Understand the main features and functions of mortgage payment protection insurance (MPPI) and accident, sickness and unemployment (ASU) insurance. 7. Understand the main features and functions of personal accident insurance. 8. Understand the main features and functions of long-term care insurance and the context in which it is used. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 5.1 Explain the insurance cover provided. 5.2 Describe the policy structure. 5.3 Describe the main features of group policies. 5.4 Describe the effects of morbidity, medical developments, investment and expenses on policy design and premium structures. 5.5 Describe underwriting issues. 5.6 Describe the need for cover. 5.7 Explain the amount of cover needed. 5.8 Describe split benefit trusts for death benefits. 5.9 Explain the advantages and drawbacks of critical illness cover and income protection. 6.1 Describe the cover provided by MPPI and ASU long term illness, incapacity, unemployment, differences between MPPI and ASU. 6.2 Explain the need for MPPI and ASU. 6.3 Describe the main limitations on the insurance provided. 6.4 Compare MPPI with ASU, income protection and critical illness insurance their advantages and drawbacks. 6.5 Describe the state support available for mortgage costs qualifying rules, main limits on benefits, income support for mortgage interest (ISMI). 7.1 Describe the types of cover available death, specified injury. 7.2 Identify the limitations cover, annual policy. 7.3 Describe personal accident insurance for children and its availability, group schemes. 7.4 Assess individual needs. 8.1 Explain the main features and taxation of long-term care insurance. 8.2 Identify the methods of meeting the need for income to pay for long-term care. 8.3 Describe state (including NHS) and local authority help that is available for LTC including qualifying conditions and amounts. 8.4 Identify other means of long-term care planning including accumulating funds, use of the home, ownership of the home, equity release, accelerated death benefits and viatical settlements. 8.5 Explain power of attorney, enduring power of attorney, lasting power of attorney need, basic procedure, 30

31 The learner when awarded credit for this unit will: 9. Know the main types of medical insurance and their uses. 10. Know the main needs for business insurance protection. 11. Analyse consumers circumstances and suitable protection products, taking account of any existing arrangements. 12. Select suitable protection products to specific consumer s circumstances. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: consequences, court of protection. 9.1 Describe the cover provided including the difference between acute and chronic conditions, overseas aspects, the main different levels of benefits and the use of policy excesses. 9.2 Discuss the benefits of having medical insurance. 9.3 Discuss underwriting issues including the impact of preexisting conditions. 9.4 Discuss the differences between individual and group plans. 9.5 Describe the features and limitations of other medical insurance plans health cash plans, dental plans Identify the need and appropriate use of Key person insurance, Shareholder insurance and partnership insurance Assess the factors shaping consumers circumstances and protection needs Analyse consumers risk aversion and exposure Assess the affordability and suitability of protection products for consumers Evaluate the inter-relationship of protection products and it consequences for suitable and affordable solutions Assess the impact of new solutions on existing arrangements Analyse the range of solutions available to suit different types of circumstance Evaluate the criteria for matching solutions to consumer needs and demands Explain the factors influencing the way in which recommendations are presented Explain consumer rights and the regulatory requirements applicable to the provision of protection advice Appraise the consequences of inadequate protection Unit 5 Learning outcome (LO) 1. Understand the purpose and scope of financial protection. U1.1 Main types of cover life assurance, income protection insurance, critical illness insurance, mortgage payment protection insurance, accident sickness and unemployment insurance, personal accident insurance, long term care insurance, private 31

32 2. Understand the main types of life assurance policy and estate planning. medical insurance U1.2 The main areas of need for protection family and personal protection, mortgage, long term care, inheritance tax planning and business protection U1.3 Divorce and relationship breakdown impact on policies and changing needs U1.4 The role of employment and pension-based protection benefits dependence on employment based cover, advantages and drawbacks U1.5 Regulatory issues investment policies, non investment long term care policies, other noninvestment insurance policies U1.6 State benefits their relevance to the provision of protection policies, main features of: income support, jobseekers allowance, child benefit, bereavement payment, bereavement allowance, widowed parent s allowance, carer s allowance, statutory sick pay, incapacity benefit, pension credit, disability living allowance, attendance allowance, working tax credit, child tax credit, state dependant s pensions, statutory maternity pay, paternity allowance U1.7 Assessing priorities in life and health protection individual and family priorities U1.8 The importance of determining existing protection arrangements and their consequences for protection planning U2.1 The principles of life assurance, proposers, lives assured, single and joint life policies U2.2 Main types of policy, whole of life policies, term assurances, pension-based policies, group policies, effects on policy design and premium structures of mortality risk, investment and expenses, comparison of term and whole of life policies and their uses U2.3 Mechanics of life assurance policies proposal, utmost good faith disclosure, underwriting, cancellation rights, policy documentation, renewals, assignment, insurable interest U2.4 Policy proceeds surrender, claim and maturity payments U2.5 Taxation of life assurance policies - rules of the taxation of life assurance company funds, the criteria for qualifying policies and their consequences, the taxation of proceeds of nonqualifying policies, pension policies, nonpension group life policies, friendly society products U2.6 Special aspects second hand policies, assignments, commissions U2.7 Assessing and quantifying different kinds of family life assurance protection needs and choosing appropriate policies and policy features to meet needs - requirement for cover, who should be covered, type of cover, flexibility and additional features, term and permanent policies, amount of cover, inflationproofing, policy term, capital needs, liabilities, pension fund replacement, short and longer-term income replacement needs, impact of state benefits, choice of policies and affordability 32

33 3. Understand the use of trusts in life assurance. 4. Understand the main types of income protection insurance policies. 5. Understand the main types of U2.8 Principles of wills, probate and intestacy, deeds of variation, statutory wills U2.9 Outline of inheritance tax scope, chargeable transfers, potential exempt transfers, transfers on death, nil rate band, exemptions and reliefs, gifts with reservation, valuation U2.10 Inheritance tax calculations U2.11 Inheritance tax planning/implications of the preowned assets legislation U2.12 Role of life assurance in estate planning - funding for inheritance tax through regular premium life assurance, regular gifting using life assurance policies, insuring lifetime gifts and when to use level or decreasing term assurance, whole of life, back to back arrangements, gift and loan trusts, discounted gift trusts U3.1 The nature of trusts U3.2 How trusts are set up and the main roles settlor(s), trustees and beneficiaries U3.3 Choosing trustees U3.4 Main types of trust absolute (bare trusts), interest in possession, flexible, revert to settlor, discretionary, accumulation and maintenance, Married Women s Property Act U3.5 Why trusts are used - their advantages and drawbacks, when they should and should not be used U3.6 Life assurance policies under trust assignments, effects of bankruptcy, claims, dealings with beneficiaries U3.7 Tax issues of policies under trust income tax, inheritance tax, capital gains tax U4.1 The need for income protection insurance who should be insured, amount of cover, term U4.2 Main product features individual and group policies, guaranteed premium rates, unit linked and reviewable policies, deferred periods, term, escalation of cover and benefits, limitation on benefits, effects on policy design and premium structures of morbidity, investment and expenses U4.3 Proposals and underwriting premium rate structures by age, occupation, non-working insured people, effects on rates of deferred periods, escalation and policy term, difference between underwriting for incapacity rather than death U4.4 Claims and conditions definitions of incapacity, exclusions and conditions, travel and changes of occupation, monitoring claims U4.5 Taxation individual and group policies U4.6 State benefits for illness and incapacity and their impact on the need for cover U4.7 Waiver of premium existing policies, providing the cover through income protection policies U4.8 Group policies and employer policies U5.1 Insurance cover provided differences in coverage, changes in definitions, additional 33

34 critical illness insurance policies. 6. Understand the main features and functions of mortgage payment protection insurance (MPPI) and accident, sickness and unemployment (ASU) insurance. 7. Understand the main features and functions of personal accident insurance. 8. Understand the main features and functions of long-term care insurance and the context in which it is used. 9. Know the main types of medical insurance and their uses. benefits, taxation of benefits U5.2 Policy structure standalone, combined whole life or term, first claim, bolt on, single and joint life policies U5.3 Group policies U5.4 Effects on policy design and premium structures of morbidity, medical developments, investment and expenses U5.5 Underwriting issues U5.6 Need for cover who needs cover, type of cover, flexibility and additional features, term and permanent policies U5.7 Assessing the amount of cover needed, inflationproofing, policy term, capital needs, short and longerterm income replacement needs U5.8 Split benefit trusts for death benefits U5.9 Comparing critical illness cover and income protection - advantages and drawbacks U6.1 Cover provided by MPPI and ASU long term illness, incapacity, unemployment, differences between MPPI and ASU U6.2 Need for MPPI and ASU U6.3 Main limitations on the insurance provided U6.4 Comparing MPPI with ASU, income protection and critical illness insurance advantages and drawbacks U6.5 State support for mortgage costs qualifying rules, main limits on benefits, support for mortgage interest (SMI) U7.1 Types of cover death, specified injury U7.2 Limitations cover, annual policy U7.3 Personal accident insurance for children availability, group schemes U7.4 Assessing individual needs comparing with MPPI, ASU, income protection and critical illness insurance U8.1 Long term care insurance main features and taxation pre-funded protection (non investment), long term care bond, immediate needs policies, annuities, regular premium and single premium policies, costs and benefits U8.2 Meeting the need for income to pay for long term care period and costs of care U8.3 State (including NHS) and local authority help for LTC conditions and amounts U8.4 Other long term care planning accumulating funds, use of the home, ownership of the home, equity release, accelerated death benefits and viatical settlements U8.5 Power of attorney, enduring power of attorney, lasting power of attorney need, basic procedure, consequences, court of protection, living wills U9.1 Cover provided difference between acute and chronic conditions, overseas aspects, main different levels of benefits, policy excesses U9.2 Benefits of having medical insurance 34

35 10. Know the main needs for business insurance protection. 11. Analyse consumers circumstances and suitable protection products, taking account of any existing arrangements. 12. Select suitable protection products to specific consumer s circumstances. U9.3 Underwriting issues pre-existing conditions U9.4 Individual and group plans U9.5 Features and limitations of other medical insurance plans - health cash plans, dental plans U10.1 Key person insurance needs, appropriate life and health policies, basic tax position U10.2 Shareholder insurance needs, appropriate life and health policies, basic tax position U10.3 Partnership insurance needs, appropriate life and health policies, basic tax position AN1.1 Factors shaping consumers circumstances and protection needs AN1.2 How to identify and analyse risk aversion and exposure AN1.3 How to assess affordability and suitability AN1.4 Methods of identifying and reviewing suitable product solutions AN1.5 The inter-relationship of protection products and its consequences for identifying suitable and affordable solutions AN1.6 How to assess the impact of new solutions on existing arrangements A1.1 The range of solutions available to suit different types of circumstance A1.2 The criteria for matching solutions to consumer needs and demands A1.3 Factors influencing the way in which recommendations are presented A1.4 How to check consumers understanding of recommendations A1.5 Consumer rights and the regulatory requirements applicable to the provision of protection advice A1.6 The consequences of inadequate protection and how to explain these objectively to consumers 16.4 Unit 5 assessment methodology i. The assessment of Unit 5 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks. b. There are no sectional pass / fails for this assessment, a pass is 70% of the total 100 marks available Unit 6 specification Unit title Ofqual unit reference number Retirement planning (RTPL) M/501/8724 Unit level 3 Guided learning hours 50 35

36 Unit credit value 5 Unit aims i. This unit introduces students to retirement planning. ii. Students will gain an understanding of the main aims and strategies for retirement planning. iii. Students will gain an understanding of the main rules governing the tax treatment of pensions. iv. Students will gain an understanding of the main state pension benefits to which individuals may be entitled in retirement and the impact they may have on retirement planning. v. Students will gain an understanding of the basic principles underlying defined benefit pensions schemes; and defined contribution pension schemes and how their employers can build up retirement benefits by contributing to them. vi. Students will gain an understanding of how pension funds can be invested to provide capital and income in retirement. vii. Students will gain an understanding of the main criteria that can be used in choosing pension contracts and providers. viii. Students will gain an understanding of the main options for crystallising benefits for individuals with defined contribution scheme. ix. Students will gain an understanding of the suitability of registered pensions schemes and other types of investments that can be used to provide retirement benefits. x. Students will gain an understanding of pressures on pension provision, trends and planned future changes to legislation, tax regulations and practice applying to retirement planning arrangements. xi. Students will gain an understanding of (in summary form) the main rules governing pensions and divorce, or dissolution of civil partnership. xii. Students will be able to analyse consumers circumstances and suitable retirement planning products, taking account of any existing arrangements. xiii. Students will be able to apply suitable retirement planning product solutions to specific consumers circumstances Unit 6 learning outcomes / assessment criteria 36

37 The learner when awarded credit for this unit will: 1. Understand the main aims and strategies for retirement planning. 2. Understand the main tax treatment of pensions. 3. Understand the main state pension benefits to which individuals may be entitled in retirement and the impact they may have on retirement planning. 4. Understand the basic principles underlying defined benefit pensions schemes. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Describe needs at retirement and after retirement. 1.2 Identify future retirement needs. 1.3 Explain the accumulation of funds for retirement. 1.4 Explain the main types of pensions. 1.5 Describe the existing pension provision from state and private sources. 2.1 Describe the taxation of pensions from an employed person s perspective. 2.2 Describe the taxation of pensions from a self-employed person s perspective. 2.3 Describer the taxation of pensions from an employer s perspective. 2.4 Explain the choice between salary and dividends for directors, and salary and pension for employers. 2.5 Explain the tax position of pension funds. 2.6 Explain the taxation of pension benefits. 2.7 Explain the taxation of contribution refunds. 2.8 Explain the implications of the annual allowance. 2.9 Explain the implications of the lifetime allowance. 3.1 Describe the main features of the basic state pension. 3.2 Describe the main features of other state pensions. 3.3 Explain pension credit. 4.1 Explain pension and life assurance benefits. 4.2 Describe the main roles of employers and pension scheme trustees. 4.3 Explain the basic position of early retirement, early leavers and transfer values. 4.4 Describe public sector schemes. 4.5 Describe private sector schemes. 4.6 Describe pension death benefits and early retirement through ill-health. 4.7 Explain contracting out. 4.8 Explain the main implications of closure and winding up of schemes. 4.9 Describe the pension Protection Fund and Financial Assistance Scheme. 37

38 The learner when awarded credit for this unit will: 5. Understand the basic principles underlying defined contribution pension schemes and how individuals and their employers can build up retirement benefits by contributing to them. 6. Understand how pension funds can be invested to provide capital and income in retirement. 7. Understand the main criteria that can be used in choosing pension contracts and providers. 8. Understand the main options on taking benefits for individuals with defined contribution schemes. 9. Understand the suitability registered and other types of investments which can be used to provide retirement benefits. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 5.1 Explain the basic structure of defined contribution schemes. 5.2 Explain the main roles of employers and pension scheme trustees. 5.3 Describe the nature and operation of group personal pension schemes. 5.4 Calculate income tax computations and employee contributions to occupational and personal pension schemes. 5.5 Describe tax relief on employers pension contributions. 5.6 Explain employee contributions, AVCs and FCAVCs. 5.7 Describe contracting out via scheme or personal pensions. 5.8 Explain pension death benefits. 5.9 Explain stakeholder pensions Describe methods of protecting against the consequences of ill health. 6.1 Describe the risks, returns and past performance of different asset classes. 6.2 Describe the use of asset allocation in retirement planning. 6.3 Explain the use of self investment under registered pension schemes. 7.1 Explain the choice between the main kinds of defined contribution schemes. 7.2 Describe the differences in costs, administration and financial strength when choosing pension providers. 8.1 Explain the maximum tax free pension commencement lump sum and commutation rules. 8.2 Describe secured income. 8.3 Describe the basics of phased retirement. 8.4 Describe other sources of income in retirement. 9.1 Describe the tax characteristics of registered pensions compared to other types of investment. 9.2 Describe unregistered pension schemes. 9.3 Describe the use of ISAs. 9.4 Explain the direct investment in cash, bonds and equities. 9.5 Describe the use of OEICs/ unit trusts and other collective investments. 9.6 Describe the use of life assurance contracts. 9.7 Describe the use of property. 9.8 Describe the use of selling a business or a share in a business. 38

39 The learner when awarded credit for this unit will: 10. Understand the pressures on pension provision, trends and planned future changes. 11. Understand the main rules governing pensions and divorce. 12. Appraise suitable retirement planning products, taking account of customers circumstances. 13. Apply suitable retirement planning product solutions to specific customers circumstances. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 9.9 Explain purchased life annuities Explain the reasons for trend away from defined benefit schemes Describe the effect of longevity on pension provision, including state scheme Describe planned reforms to state pensions Describe personal accounts Explain the use of offsetting, earmarking and sharing Describe the implications for pension planning on divorce Analyse factors shaping consumers circumstances, retirement aspirations and prospects Analyse risk profile and exposure Assess affordability and suitability Analyse the types of pension products, associated risks and suitability criteria Analyse the range of solutions available to suit different types of circumstance Apply the criteria for matching solutions to consumer needs and demands Analyse factors influencing the way in which recommendations are presented Assess consumer rights and the regulatory requirements applying to the provision of retirement planning and advice Analyse the consequences of inadequate retirement provision Unit 6 Learning outcome (LO) 1. Understand the main aims and strategies for retirement planning. U1.1 Determining needs at retirement and after retirement planning when and how to retire, need for capital for asset purchases, repayment of liabilities, retirement income and capital in the initial retirement years, longer term income needs, surviving spouse/partner income needs, potential need to fund long term care, estate planning aims U1.2 Quantifying future retirement needs in advance methods of assessing and budgeting, based on current and expected expenditure, potential long term care fees, estimating future rates of inflation and real investment returns, estimating clients other income and capital resources U1.3 Accumulating funds for retirement - investment strategies and asset allocation, long, medium and short timescales 39

40 2. Understand the main tax treatment of pensions. 3. Understand the main state pension benefits to which individuals may be entitled in retirement and the impact they may have on retirement planning. U1.4 Accumulating funds for retirement tax strategies, tax relief, tax shelter, advantages and disadvantages of maximising tax free cash, protecting existing benefits, minimising future tax in retirement U1.5 Overview of the main types of pensions state pension benefits, defined benefit and defined contribution occupational pension schemes, cash balance schemes, personal pensions/stakeholder pensions U1.6 Identifying the existing pension provision from state and private sources DWP projections, defined benefit scheme benefit statements and statutory money purchase illustrations U2.1 Employee taxation, basic income tax and national insurance computations - simple fringe benefits, reliefs and allowances, U2.2 Self-employed taxation - basic income tax and national insurance computations reliefs and allowances U2.3 Employer taxation corporation tax, national insurance contributions, income tax for unincorporated employers, effect of making pension contributions, 'wholly and exclusively' test (in outline), spreading of relief. U2.4 Special considerations the choice between salary and dividends for directors, and salary and pension for employees U2.5 The tax position of pension funds the treatment of different classes of asset including non-qualifying assets U2.6 Taxation of pension benefits state pension benefits, occupational and personal pension schemes U2.7 Taxation of contribution refunds U2.8 The annual allowance the impact on pension funding and benefits at crystallisation. The taxation consequences of excess contributions U2.9 The special annual allowance anti-forestalling rules U2.10 The lifetime allowance benefits at crystallisation, enhanced and primary protection, taxation consequences of overfunding U3.1 Basic state pension payment age, entitlement, pension amount and increases, effect of deferment, taxation, national insurance contribution record, basic state pension widow(er) s death, civil partner's death and bereavement benefits, Department for Work and Pensions pension forecast service U3.2 Graduated pensions, state earnings related pension scheme (SERPS) and the state second pension (S2P) calculation of benefits, including widow(er) s and civil partner's benefits under SERPS, contracting out of S2P generally U3.3 Pension Credit structure, impact of claimants income and capital position, effects on pension planning 4. Understand the basic principles U4.1 Pension and life assurance benefits accrual rates, 40

41 underlying defined benefit pensions schemes. 5. Understand the basic principles underlying defined contribution pension schemes and how individuals and their employers can build up retirement benefits by contributing to them. eligibility, inflation protection, contracting out, commutation issues, life assurance, dependants' income benefits U4.2 Main roles of employers and pension scheme trustees, requirement for member-nominated trustees, importance of scheme rules determining and limiting benefit options U4.3 Basic position of early retirement, early leavers and transfer values reduction in benefits, where transfers can be made and how they can be calculated (in outline only), right to transfer values, refunds of contributions U4.4 Public sector schemes benefit structures, security, transfer club U4.5 Private sector schemes scheme specific funding requirements, accounting for employers pension funds and liabilities under accounting standard FRS17 and IAS 19, employees financial security and risk to defined benefit pension benefits U4.6 Pension death benefits and early retirement through ill-health tax efficiency and limitations of cover, cost U4.7 Contracting out of S2P basic position, effect on national insurance contributions U4.8 Closure and winding up of schemes main implications U4.9 Advice issues pension opt-outs, transfers and early leavers, added years AVCs and interaction between different types of scheme U4.10 Pension Protection Fund and Financial Assistance Scheme - Revised wind up provisions for insolvent employers; The statutory funding objective; implications of contracting-out; LPI requirements; Three month vesting; Role of The Pensions Regulator U5.1 Basic structure of defined contribution schemes contributions, funds, benefits, transferability U5.2 Main roles of employers and pension scheme trustees, importance of scheme rules determining and limiting benefit options U5.3 Nature and operation of group personal pension schemes - contributions by employer and employee, control of investment and benefits. National Employment Savings Trust (NEST). U5.4 Income tax computations and employee contributions to occupational and personal pension schemes methods of giving relief, computation of relief, timing of relief, effects on payments on account U5.5 Tax relief on employers pension contributions to personal pensions and defined contribution occupational pension schemes U5.6 Employee contributions, AVCs and FCAVCs U5.7 Contracting out of S2P via scheme or personal pensions basic position, effect on national insurance contributions, protected rights U5.8 Pension death benefits U5.9 Stakeholder pensions definition, standards, the requirements for employer designation U5.10 Protecting against consequences of ill health - 41

42 6. Understand how pension funds can be invested to provide capital and income in retirement. 7. Understand the main criteria that can be used in choosing pension contracts and providers. 8. Understand the main options on taking benefits for individuals with defined contribution schemes. 9. Understand the suitability registered and other types of investments which can be used to provide retirement benefits. 10. Understand the pressures on pension provision, trends and planned future changes. availability and effect of waiver of premium feature, income protection arrangements, the use of critical illness insurance, contributions whilst incapacitated U5.11 Contributions for others, including contributions by parents for children U5.12 Advice issues - estimating how much needs to be invested to accumulate adequate funds for retirement, affordability, assessing a client s investment risk profile U6.1 Asset classes risks, returns and past performance (cross reference to Investments and Risk unit) U6.2 Asset allocation timescale, relation to other assets, client attitudes, life styling U6.3 Self investment under registered pension schemes, including SIPPs and SSASs the main rules, tax implications, characteristics and opportunities U7.1 The choice between the main kinds of defined contribution schemes and their relative merits U7.2 Choosing pension providers - costs, administration, financial strength U7.3 Fund choice, past performance, risk, life styling U7.4 Self-investment options U8.1 Taking benefits U8.2 Maximum tax free pension commencement lump sum and commutation rules U8.3 Secured income - scheme pension - annuities, including level or escalating inflation linked, with profit and unit linked, criteria for selecting annuity type, impaired life and enhanced, single life and joint life, death benefits after retirement: capital protection and guarantees; and open market option U8.4 Basics of phased retirement; unsecured income with risk aspects, death benefits; income tax and IHT implications, annuity options. U8.5 Other sources of income in retirement U9.1 The tax characteristics of registered pensions compared to other types of investment tax treatment, accessibility, contribution limits and allowances, risk, availability, charges U9.2 Unregistered pension schemes U9.3 ISAs U9.4 Direct investment in cash, bonds and equities, importance of diversification, danger of overreliance on employer-linked investments (eg share schemes) U9.5 OEICS/ unit trusts and other collective investments U9.6 Life assurance contracts U9.7 Property residential and commercial - and use of equity release products to release funds U9.8 Selling a business or a share in a business U9.9 Purchased life annuities U10.1 Reasons for trend away from defined benefit schemes/final salary schemes. U10.2 Effect of longevity on pension provision, 42

43 11. Understand the main rules governing pensions and divorce. 12. Appraise suitable retirement planning products, taking account of customers circumstances. 13. Apply suitable retirement planning product solutions to specific customers circumstances. including State Scheme U10.3 Planned reforms to State Pensions, including increase in State Pension Age and changes to S2P structure U10.4 Reinstatement of link between State basic pension and earnings inflation U10.5 Abolition of contracting out on defined contribution basis U10.6 Personal Accounts / NEST U11.1 Offsetting U11.2 Earmarking U11.3 Sharing U11.4 Implications for pension planning effect on allowances and the need to build up additional benefits AN1.1 Factors shaping consumers circumstances, retirement aspirations and prospects AN1.2 How to identify and analyse risk profile and exposure AN1.3 How to assess affordability and suitability AN1.4 Methods of identifying and reviewing suitable product solutions AN1.5 The types of pension products, associated risks and suitability criteria A1.1 The range of solutions available to suit different types of circumstance A1.2 The criteria for matching solutions to consumer needs and demands A1.3 Factors influencing the way in which recommendations are presented A1.4 How to check consumers understanding of recommendations A1.5 Consumer rights and the regulatory requirements applying to the provision of retirement planning advice A1.6 The consequences of inadequate provision and how to explain these objectively to consumers 16.8 Unit 6 assessment methodology i. The assessment of Unit 6 has one component: a. 50 multiple-choice questions. This component of the examination is to be completed in one hour. This component of the examination is worth 50 marks. b. There are no sectional pass / fails for this assessment, a pass is 70% of the total 100 marks available. 16. Module 4 Assessment of Investment Advice and Knowledge 17.1 Unit 7 specification Unit title Assessment of investment advice and knowledge (ASSI) Ofqual unit reference number A/501/

44 Unit level 3 Guided learning hours 40 Unit credit value 4 Unit aims i. This unit will demonstrate a student s ability to identify consumers needs and demands and recommend suitable and affordable investment solutions, using their knowledge and understanding of the UK finance industry, regulation, ethics, investments, risks, protection and retirement planning Unit 7 learning outcomes / assessment criteria Learning outcome (LO) The learner when awarded credit for this unit will: 1. Analyse consumers financial circumstances. 2. Apply suitable investment solutions. Assessment criteria (AC) Assessment of the LOs will require a learner to demonstrate that they can: 1.1 Appraise consumers circumstances, financial needs risk profile. 1.2 Evaluate the advice process. 2.1 Analyse the range of investment solutions available to suit different types of circumstance. 3. Apply suitable protection solutions. 3.1 Analyse the range of protection solutions available to suit different types of circumstance. 4. Apply suitable retirement planning solutions. 4.1 Analyse the range of pre and post retirement planning solutions available to suit different types of circumstance. 5. Understand the key features of the different types of financial products. 5.1 Assess the different types of financial products available Unit 7 Learning outcome (LO) 1. Analyse consumers financial circumstances. 2. Apply suitable investment solutions. 3. Apply suitable protection Students will draw on the knowledge gained in units 1-6 and demonstrate their ability to identify consumers needs and demands and recommend suitable and affordable investment solutions, using their knowledge and understanding of: The UK finance industry, regulation and ethics; 44

45 solutions. Investment and risks; 4. Apply suitable retirement planning Protection; and, solutions. 5. Understand the key features of the different types of financial products. Retirement planning Unit 7 assessment methodology i. The assessment of Unit 7 has one component: a. 60 multiple-choice questions. This component of the examination is to be completed in two hours. This component of the examination is worth 60 marks. b. There are no sectional pass / fails for this assessment, a pass is 70% of the total 60 marks available. 45

46 About the Institute of Financial Services The Institute of Financial Services supports and promotes professionalism in the regulated advice sector and the wider financial services industry. It does so through the provision of qualifications, continuing professional development services and through the dissemination of best practice. The Institute is a division of ifs University College, a registered charity, incorporated by Royal Charter and is recognised as an awarding organisation by Ofqual. Institute of Financial Services ifs House 4-9 Burgate Lane Canterbury Kent CT1 2XJ T: +44 (0) (option 1) E: [email protected] W: 46