FSA clarifies LTC and state benefits position

The Financial Services Authority has clarified which qualifications advisers must have before they can recommend long-term care policies, as well as stressing the importance of considering means-tested state benefits when giving advice.

In response to several queries from advisers about its expectations for training in long-term care (LTC) planning, the FSA says advisers must have passed an appropriate LTC exam before they may be assessed as competent in that area.

The regulator’s latest newsletter adds that if an adviser is not yet assessed as competent, their work must be supervised by someone who has passed an appropriate exam, such as the Chartered Insurance Institute’s (CII) certificate in financial planning and LTC insurance, and has the necessary technical knowledge and assessment and coaching skills.

When advising on products which can be used for LTC fees planning but which are not designed solely for the purpose, the FSA says advisers must have an adequate level of knowledge and skills to be competent for their role.

It states: “If you are recommending any product that meets long-term care fees planning needs, we expect you to have an appropriate level of knowledge of all relevant care fees planning issues, even if the product is not covered by the long-term care insurance qualification.”

In addition, in order to meet the suitability requirements in giving advice, advisers should not be in a position where they avoid recommending certain products because they have not passed the relevant exam.

The newsletter also outlines the FSA’s position with regards to means tested state benefits and says although factors impacting on advice will vary from product to product and customer to customer, advisers may wish to take into account whether a product will affect a customer’s entitlement for means tested benefits.

The regulator has seen failings in this area, including a firm recommending a low premium pension to someone in their late 50s with no previous pension provision, and a firm recommending a lifetime mortgage to a customer without considering the impact on the pension credit they were receiving.

Among the good practices it has seen are a firm which ensures all customers who are in receipt of child and family tax credits are aware of the different implications of receiving income or achieving capital growth within their savings and investments.

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