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CII Diploma·ModuleR05

R05: Financial Protection

R05 covers financial protection products and planning, including the knowledge needed to advise clients on their protection needs. Topics include financial protection fundamentals, life insurance products, insurance product features, client needs assessment, protection in a business context, trust arrangements, taxation of insurance benefits, state benefits integration, and claims management.

Questions
504
Units
9
Topics
9

What’s in it.

9 units

Sample questions

3 of many

A few questions from this module, with the answer and a full explanation. The complete bank is available when you start practising.

  1. When is an absolute trust most appropriate for a life assurance policy?

    • When the policyholder wants the flexibility to add new beneficiaries (such as future children) as family circumstances change
    • When the beneficiaries are all under the age of 18 and the trustees must hold funds until majority
    • When the settlor is certain about who should benefit and family circumstances are unlikely to change (e.g. adult children already named, stable family situation)
      Correct answer
    • When the policy has an investment element and is subject to discretionary investment management by the trustees
    Explanation

    An absolute trust is best suited to clients who have certainty about their beneficiaries. For example, a client whose children are adult and whose marriage is stable and long-established may be comfortable fixing beneficiaries at the outset. The key advantage is simplicity and the absence of periodic IHT charges. The key disadvantage is inflexibility — once set, the beneficiaries cannot be changed.

  2. What are the tax advantages of a Relevant Life Plan for the employer?

    • The employer receives a tax credit equal to 20% of the premiums paid each year
    • Premiums are a deductible business expense for corporation tax purposes and are not treated as a benefit-in-kind for the employee
      Correct answer
    • Premiums are exempt from insurance premium tax, which makes RLPs cheaper than personal policies
    • Premiums can be paid from the company's pension fund, making them doubly tax-advantaged
    Explanation

    For the employer, Relevant Life Plan premiums are a deductible business expense (reducing corporation tax liability). Critically, the premiums are NOT treated as a benefit-in-kind for the employee, meaning the employee pays no income tax or National Insurance on the value of the benefit the employer is providing. This makes the RLP significantly more cost-efficient than the employer increasing the employee's salary to fund a personal policy.

  3. A client with savings of £10,000 becomes unable to work and claims Universal Credit. They also have new-style ESA (£117.60/week). How does the £10,000 savings affect their UC entitlement?

    • Savings between £6,000 and £16,000 reduce UC by £4.35/month for every £250 (or part thereof) above £6,000; on £10,000 (£4,000 above the lower limit), this is approximately £69.60/month tariff income reduction
      Correct answer
    • The £10,000 savings are disregarded for the first 6 months of the UC claim to allow adjustment
    • Capital is only taken into account for UC if the claimant also has earnings above the work allowance
    • Savings of £10,000 fully disqualify the client from UC because they exceed the £6,000 lower threshold
    Explanation

    UC uses a tariff income system for capital between £6,000 and £16,000. For every £250 (or part) above £6,000, the claimant is treated as having £4.35/month notional income (tariff income). For savings of £10,000: excess above £6,000 = £4,000, which is 16 full £250 tranches. Tariff income = 16 × £4.35 = £69.60/month reduction in UC. This is added to any actual income to determine the UC deduction. Savings above £16,000 would disqualify entirely. This rule means even moderate savings significantly reduce UC entitlement.

Frequently asked questions

4 questions
What topics are covered in CII R05?

CII R05 covers financial protection fundamentals, life insurance products, insurance product features, client needs assessment, protection in a business context, trust arrangements for protection, taxation of insurance benefits, state benefits integration, and claims management.

How many questions are in the CII R05 exam?

The CII R05 exam consists of 100 multiple-choice questions to be completed in 2 hours. The pass mark is 70%.

Is CII R05 hard to pass?

R05 is generally considered more accessible than R03 and R04, but requires thorough knowledge of protection products and trust arrangements. Candidates who have client-facing protection experience often find it more straightforward.

How should I prepare for CII R05?

Start with core life insurance products and client needs assessment, then work through trust arrangements and taxation of benefits. CII Prep provides R05 practice questions at easy, medium, and hard difficulty with detailed explanations.