R06 June 2026 — Deep Analysis: Daniel & Abby, Alan & Nadira

CS1

Daniel & Abby

Retirement income · IHT planning · Tax efficiency · Protection review

Examiner's planted issues — every one is testable

Daniel 100% global equity trackers, 3 years from retirement — sequencing risk
Abby considering an annuity — classic annuity vs alternatives question
Abby has no income, no State Benefits — carer for her mother; State Pension credits / NI record issue, unused personal allowance
Risk profile self-assessed as moderate-high but NEVER formally evaluated
£300,000 term assurance vs £20,000 mortgage — gross over-insurance / repurposing question
No income protection, no CIC
Unit trusts £160,000 held personally by higher-rate taxpayer — CGT/dividend tax inefficiency
ISA allowances unused
Daniel wants commodities/alternatives "because he believes this will improve his portfolio" — unverified belief; adviser challenge question
IHT objective with "without disposing of current assets" constraint — points hard at whole of life in trust + gifts from income
Mirror Wills — estate passes by survivorship; IHT all crystallises on second death
Abby supporting her mother financially — affordability drag + future care costs + possible inheritance

AREA 1 Near-certain Additional information — Q1(a) 12–15 marks ▼

Past paper: Asked in every single sitting July 2022 – January 2026. Phrased around the objectives: "State the additional information a financial adviser would require in order to advise Daniel and Abby on [their retirement income needs / the suitability of their current arrangements]."

Tip: Aim to memorise ~20 points, deploy the best 15. The examiner expects breadth across expenditure, health, pensions, investments and estate.

Expenditure & needs

Current expenditure / budget / affordability / emergency fund adequacy
Target income and capital needs in retirement
Level of financial support being provided to Abby's mother / expected duration / future care costs
Any planned capital expenditure (holidays, helping children/grandchildren)
Priority of objectives (retirement income vs IHT planning)

Health & longevity

Health status of both / family longevity history
Abby's mother's health and care needs / any inheritance expected from her

Pensions

BR19 / State Pension forecasts for both / Abby's NI record and gaps (carer's credits?)
Daniel's scheme: retirement options offered (FAD / UFPLS / annuity in-scheme?)
Pension contribution history / carry forward available for Daniel
Salary sacrifice available? / employer matching above 6%?
Charges on both pension plans / fund choices available
Does Abby's scheme have a Guaranteed Annuity Rate (GAR)?
Current annuity rates / open market option comparison
Nominations confirmed up to date (stated — but confirm completeness)

Investments & tax

Base cost of Daniel's unit trusts / unrealised gains / any losses carried forward
Use of CGT annual exempt amount to date
Interest rate on £80,000 deposit account / rate on current account
Dividend yield on unit trusts / ISAs
Asset allocation across whole portfolio / charges
Willingness to transfer assets between spouses

Estate & protection

Has the IHT liability been quantified? / any previous gifts (PETs/CLTs) in last 7 years
Surplus income available for gifting?
Employer sick pay terms for Daniel / any group income protection
Term assurance: premium, term remaining, conversion options

Risk

Formal attitude to risk assessment (never done)
Capacity for loss — especially Abby with no income

AREA 2 High probability Abby's annuity decision 10–14 marks ▼

Past papers: Jan 2023 Q1(b) "why they might wish to purchase an annuity" (11 marks); Sep 2022 Q1(b) FAD vs annuity (12 marks); Jul 2025 Q1(b) annuity factors. One of the most frequently tested R06 topics. The case study says Abby "is considering the merits" — that phrase is an examiner flag.

Benefits of lifetime annuity

Guaranteed income for life — she currently has NO income at all
No investment risk / removes sequencing risk
Simplicity / no ongoing advice or admin costs
Cross-subsidy from mortality pooling
Can add escalation (inflation protection)
Can add joint life / spouse's pension for Daniel
Can add guaranteed period / capital protection
Uses her personal allowance (£12,570) — income up to PA is tax-free
Open market option to maximise rate / possible enhanced annuity

Drawbacks of lifetime annuity

Irrevocable / no flexibility once purchased
Buying at 62 — rates are lower at younger ages; deferring could secure better rates
Death of annuitant early = poor value (unless protection added)
No investment growth potential
Inconsistent with stated moderate-high ATR (unverified)
Inflation erosion if level annuity chosen
Loses pension death benefits — currently nominated to Daniel
Does she even NEED income now? Daniel earns £90,000 — no household income shortfall until his retirement
Removes option of FAD/UFPLS later

Alternatives to consider

Flexi-access drawdown — flexible, keeps fund invested, death benefits, but investment risk and charges
UFPLS — ad hoc lump sums, 25% of each tax-free
Deferral — leave fund untouched until actually needed; annuity rates improve with age
Phased approach — combination

Examiner's favourite tactical point: Abby has an unused personal allowance every year. Crystallising pension income of up to ~£16,760 a year (PA + 25% tax-free element via UFPLS) could be drawn virtually tax-free. An immediate full annuity wastes this planning flexibility.

AREA 3 High probability Daniel's pension — accumulation phase 10–13 marks ▼

AREA 4 High probability Daniel's investment strategy approaching retirement 8–12 marks ▼

AREA 5 Near-certain IHT — calculation, explanation, mitigation 10–14 marks per part (possibly 2 parts) ▼

Past papers: Oct 2024 Q1(d) recommend & justify IHT mitigation + Q1(e) whole of life explanation; Jan 2025 DGT process; Jul 2023 discretionary trust. The third stated objective makes this unavoidable.

The liability calculation

House	£550,000
Current account	£18,000
Deposit account	£80,000
Abby ISA	£170,000
Daniel ISA	£210,000
Unit trusts	£160,000
Estate (excl. pensions)	£1,188,000
NRB ×2	(£650,000)
RNRB ×2 (home > £350k, passing to direct descendants)	(£350,000)
Taxable	£188,000
IHT @ 40%	£75,200

First death: spouse exemption = no IHT; 100% NRB and RNRB transfer
Estate below £2m so no RNRB taper
ISAs lose their tax wrapper status for IHT — fully chargeable
From 6 April 2027 unused pensions (£572,000 today) enter the estate → liability could rise towards ~£304,000. Reward candidates who know this change.

Mitigation WITHOUT disposing of assets (their explicit constraint)

Flagship answer: Whole of Life, joint life second death, written in trust
Pays exactly when IHT falls due (second death). Written in trust for the children → proceeds outside the estate, no probate delay, immediate funds to pay HMRC. Sum assured set to projected liability; indexation option to track estate growth. Guaranteed vs reviewable premiums. Premiums can be exempt as gifts out of normal expenditure or within £3,000 annual exemptions.

The examiner's repeated complaint (Oct 2024): candidates forget it ONLY works if written in trust. Does not reduce the IHT bill — it funds it.

Supporting strategies

Annual exemptions £3,000 each (+ prior year carry forward) — modest erosion without losing meaningful capital
Small gifts £250; wedding gifts £5,000 per child / £2,500 per grandchild
Gifts out of normal expenditure — Daniel's £90,000 income may support regular exempt gifts (must be regular, from income, no impact on living standards)
Pension funding (pre-2027 rules) keeps wealth in a currently IHT-free wrapper
Review nominations: consider children as beneficiaries on death benefits
Mention then dismiss (shows judgement): DGT/loan trust (requires capital disposal — conflicts with constraint); AIM/BR portfolios (high risk; relief cut to 50% for AIM from April 2026; conflicts with unassessed ATR); lifetime gifting of the unit trusts (PETs — works but disposal + CGT)

Possible companion: "How could the children plan to meet the liability?"

Life of another policy: children insure parents' lives, pay premiums, own the policy
Funds in trust from grandparents
Instalment option: IHT on land/property payable over 10 years (with interest)
Loss on sale relief if assets sold within set periods

AREA 6 Near-certain Tax efficiency — recommend & justify 12–14 marks ▼

AREA 7 High probability Commodities & alternative investments 8–10 marks ▼

AREA 8 Moderate probability Protection review 8–12 marks ▼

AREA 9 Possible State Pension & Abby's NI position 6–8 marks ▼

AREA 10 High probability Annual review — final question part 8 marks ▼

WILDCARDS Lower probability CS1 — Cover the bases ▼

CS2

Alan & Nadira

Family protection · ESG investing · Workplace pensions · Building savings

Examiner's planted issues — every one is testable

Protection is the FIRST stated objective + "limited family support" — protection will dominate this case study
Joint life level term £200,000 vs repayment mortgage £170,000 — wrong type (level vs decreasing) and pays only once
No income protection, no CIC — family utterly dependent on two incomes
Nadira has NO employer benefits at all (no DIS) — she is the bigger protection gap
Alan's pension has NO nomination — explicitly flagged; guaranteed test
Nadira's pension 100% UK Deposit fund at age 35 — guaranteed test; wholly unsuitable
Alan's pension 100% UK equity tracker — no global diversification
ESG objective for ALL future investing
Only £40,000 equity in home; 81% LTV
Low cash relative to commitments; ISA allowances unused
Both moderate ATR (formally consistent — no risk mismatch flag here except Nadira's deposit fund)
Wills + LPAs done and confirmed appropriate — examiner signalling "don't waste marks here"; estate questions unlikely

AREA 11 Near-certain Additional information — Q2(a) 12–15 marks ▼

Income, expenditure & resources

Current expenditure / surplus income / affordability of new premiums
Emergency fund adequacy vs monthly outgoings
Mortgage: interest rate, term remaining, fixed/variable, ERCs
Any other debts (loans, credit cards, car finance)
Job security for both / career plans / Nadira's plans re full-time work
Any more children planned?

Protection-specific

Employer sick pay terms for BOTH (how long full/half pay)
Alan's DIS: written under scheme trust? nomination completed?
Term policy: premium, remaining term, guaranteed/reviewable, indexation, conversion options
State benefit entitlements (bereavement support payment eligibility, child benefit position)
Smoker status / detailed health for underwriting
Childcare costs if either died or was incapacitated / who would care for children
Support available (they said limited family support — quantify)

Pensions & investments

Fund options in both workplace schemes / ESG options available
Charges on schemes and ISAs
BR19 forecasts / NI records
Contribution matching available above current levels?
Base costs/performance of existing ISA funds
High income child benefit charge position — Alan £67,000; charge applies £60,000–£80,000

Soft facts

Formal ATR/CFL assessment for each
Strength and specifics of ESG preferences (environmental? social? exclusions?) — and whether both share identical views
Priority of objectives (protection vs investing)

AREA 12 Near-certain Protection — the centrepiece (possibly 2–3 parts) 25–35 marks total ▼

Past papers: Jul 2023 Q2(d) mortgage protection unsuitability + Q2(e) recommend & justify IP for family (16 marks); Jul 2025 Q(c) recommend & justify low-cost IP (14) + Q(d) FIB vs level term (8); Apr 2024 Q2(f) protection weaknesses + Q2(g) recommend & justify policy.

12a — "Identify the weaknesses in Alan and Nadira's current protection arrangements" (8–12 marks)

Only ONE policy: joint life first death level term £200,000
Pays once only — survivor left with no cover and likely uninsurable budget pressure
Level cover vs reducing repayment mortgage — over-insurance of the debt
No cover specifically for family/income needs — two children dependent for 15+ years
No income protection for either — illness/incapacity is statistically far more likely than death at 35
No critical illness cover
Nadira: no DIS, no employer benefits whatsoever
Alan's DIS (£268,000) is employment-linked — lost on job change
Alan's pension death benefits: no nomination — trustee discretion, delay, possibly not paid to Nadira
Reliance on £30,000 cash = ~a few months' expenditure only

12b — "Recommend and justify suitable protection in the event of death" (14–16 marks)

Model answer: Family Income Benefit (FIB) — single life, one each for Alan AND Nadira
Not joint — each needs own cover; two payouts possible; survivor retains cover. Mirrors exactly what July 2023's 16-mark FIB question rewarded.

Term: ~15–18 years — until youngest (7) reaches financial independence (~22–25)
Benefit level set to replace lost income / cover childcare (e.g. £25,000–£30,000 p.a. each)
Pays tax-free regular income — matches ongoing family expenditure need; no investment decisions for grieving survivor
Effectively decreasing term → cheapest form of family cover; suits their limited budget
Indexation option to protect against inflation
Written in trust — outside estate, no probate delay, paid quickly
Guaranteed premiums for budgeting certainty
Waiver of premium — keeps cover alive if they're too ill to pay
Both young and healthy → cheap, simple underwriting
Guaranteed insurability options for future children
Cover Nadira properly despite lower earnings — childcare replacement cost is substantial

12c — "Recommend and justify income protection" (12–14 marks)

Income protection insurance, single life, for each of them
Covers up to ~60% of gross income (Alan ~£40,000; Nadira ~£27,000) — benefits paid TAX-FREE
Own occupation definition — widest cover
Deferred period matched to employer sick pay and £30,000 cash buffer — 13/26 weeks reduces premium
Term to retirement age — can claim multiple times; insurer cannot cancel
Covers ANY condition preventing work (back pain, mental health) — far broader than CIC
Rehabilitation/proportionate benefit on partial return
Indexation option; WOP automatic
Justification: mortgage £170,000 must be paid regardless of illness; no employer benefits for Nadira; limited family support; State benefits inadequate

12d — "FIB vs level term" comparison (8 marks — exact question asked July 2025)

FIB: regular tax-free income; effectively decreasing; cheaper; simple for survivor; can usually commute to lump sum
Level term: lump sum; maintained sum assured throughout; can repay debts outright; needs investing/managing; may affect means-tested benefits; more expensive
Mortgage logic: decreasing term assurance is the correct match for a repayment mortgage

12e — "Explain why Alan should complete a death benefit nomination" (5–8 marks)

Trustees currently have no guidance — discretion exercised without knowing his wishes
Risk benefits paid other than as he'd want / delay while trustees investigate
Nomination = speedy payment to Nadira, no probate
Keeps benefits outside estate (discretionary disposal) for IHT
Can nominate children as contingent/successor beneficiaries
Should be reviewed at every major life event
Death benefits tax-free if he dies pre-75 (within LSDBA, designated within 2 years)

AREA 13 High probability Nadira's pension fund — the deposit fund problem 8–10 marks ▼

AREA 14 Near-certain ESG investing 7–12 marks ▼

AREA 15 High probability Building savings & investments — third objective 10–14 marks ▼

AREA 16 Possible Mortgage overpayments 8–10 marks ▼

AREA 17 High probability Annual review — final question part 8 marks ▼

WILDCARDS Lower probability CS2 — Cover the bases ▼

Cross-Cutting Exam Intelligence

Question verbs — what they demand

State / Identify — short bullet points, no explanation needed
Explain — point + because/so that
Recommend and justify — action + the specific reason it benefits THIS client (Oct 2025 examiner: candidates lost marks for unjustified recommendations and for missing applicable tax rates)
Outline benefits and drawbacks / five and five — exactly the number asked, both sides

The five examiner complaints that recur in comments

Not reading the case study facts (e.g. Oct 2024: missing that the couple weren't married)
Whole of life for IHT without saying "in trust"
Confusing FIB with level term assurance (Oct 2025 comment — and a likely CS2 question)
Recommendations without justification or without tax rates
Generic answers not tied to the client's numbers and circumstances

June 2026 — syllabus-current technical points worth dropping in

Pensions into estates for IHT from 6 April 2027
AIM/unlisted business relief cut to 50% from April 2026 (effective 20% IHT)
NRB frozen at £325,000 to 2029/30
CGT 18%/24% on investments; AEA £3,000
Dividend allowance £500; employer NI 15% (salary sacrifice value up)
MPAA £10,000; AA £60,000; carry forward 3 years
HICBC taper £60,000–£80,000
FCA SDR & investment labels (anti-greenwashing) in force since May 2024
LSA £268,275 / LSDBA £1,073,100 (post-LTA regime)

Probability-Weighted Revision Priority

Must be word-perfect

Additional information banks (both) · Abby annuity pros/cons · IHT mitigation + WOL in trust · FIB recommendation with all setup features · IP recommendation with all setup features · Nadira fund-switch rationale · Tax-efficiency recommend & justify · ESG difficulties · Annual review bank

Strong second tier

Daniel contribution case · Daniel de-risking · Nominations explanation · Commodities benefits/drawbacks · Savings strategy · Mortgage overpayments

Cover the bases

LPAs · Consumer Duty · Cashflow limitations · Emergency fund factors · Bereavement benefits · Class 3 NI / carer credits · Deed of variation · JISAs