October 31 sees the implementation of CF8, the qualification required by the FSA for long-term care advisers.Any regulatory step designed to protect a vulnerable segment of society is to be applauded. But the view of many industry professionals is that the move is merely token and does not address the issues facing elderly people and their families. Current regulations state that existing advisers (those deemed competent in October 2004) must have achieved the CF8 qualification by October 31, 2006. But any adviser not practising in October 2004 has a two-year window from the date they started working in the care fees planning arena to obtain CF8 – and this date is flexible if they stop working in this area for a period of time. Even then, CF8 covers only one aspect of financial planning for the elderly: the writing of Immediate Needs Annuities (INAs), just one of a raft of methods that may be recommended to pay for long-term care. The phrase long-term care is a misnomer. To the industry it means insurance plans and to the public it conjures up pictures of frail, elderly people sitting in high-backed chairs. In reality, these are sweeping generalisations. Care fees planning is a better title, encompassing younger people wishing to plan ahead through to older people who need constant care. A person in a care home should demand, and expect, to receive the same quality of advice as other members of society. Sadly, CF8 governance only applies to insurance plans, which for people in care homes only means immediate needs annuities (INAs). Fine, you might say, but these plans are not a universal panacea and even when they are used, they form only part of the overall solution. The most appropriate advice may be to do nothing (especially if the person is very old, frail and/or poorly). More mainstream products can be used to cover all or part of the private care fees. Only when the FSA agrees that all residents of care homes should receive advice only from a CF8-qualified adviser will we be treating the older generation with the care, sensitivity and reverence they deserve. CF8’s title must be changed from “long-term care insurance” to “care fees planning” or, better still, to “financial planning for the elderly”. For instance, a lady in a care home may have released “new liquid” capital from the sale of her property and a competent IFA may decide to invest in a low-risk bond. As long as they don’t recommend an INA they do not need CF8. While he will not have done anything wrong (in the eyes of the FSA), the IFA could have easily omitted to cover powers of attorney, eligibility for state benefits, NHS-funded contributions such as RNCC and/or the possible implications of continuing care. This cannot be right. By sanctioning this we are downgrading the very structure and framework of the intended legislation. The FSA’s refusal to specifically regulate the advice given to everyone in a care home, regardless of the advice/product purchased, compounds the very situation that they hoped to avoid and makes a mockery of qualified advisers who genuinely care about the finances of people facing care. But it would be naïve to lay the blame at the feet of the FSA. Provider firms can, and should, accept more accountability. The providers have the power to act and make a real difference. All investments require an application form and full details of policyholder(s) are requested before the investment can be implemented. While we cannot expect the provider to know which addresses are actually care homes, we can ask them to add a separate tick-box with the question “is this policy for a person in receipt of care?”. If the answer is yes, the adviser submitting the application should prove that they are competent to deal with the elderly in care, i.e. that they possess the CF8 certificate. This will protect citizens in care, while not diluting the skills and knowledge of advisers who have taken time to study for CF8. Younger people who want to plan for the possibility that they and/or their partner should consult a specialist adviser. English people are renowned for thinking that “my home is my castle”. It is not surprising then, that we react strongly when this castle is under siege. Most of the older generation bought property with the objective of passing it on to the next generation. However, when questioned further, it is not necessarily the actual property that causes the consternation but the underlying financial value, and it is the open-ended use/erosion of this money that people object to. The gifting of property is probably perceived as the most common way to remove it from possible future means testing but this is fraught with problems and unforeseen complications. Local authorities consider the gifting of property, in order to receive care, as deliberate deprivation, and if suspected they will take steps to reverse the transaction or treat the value of the property as “notional capital”. As we all live longer, more of us will have to look into the need for care, which (if assets exceed the threshold) must invariably be paid for. Government and local authority funds will be limited and while new governments may place it high on their agendas, the fact remains that the money will not be available. This bounces the responsibility for care fees planning back to individuals, who should be able to count on a well-thought-out regulatory structure that will protect them from unqualified and under-experienced advice or unscrupulous practice. As for CF8, it is a step in the right direction … but a small one. Janet Davies is joint founder and managing director of Symponia, the national affinity group for care fees planning, and head of care fees planning at Warwick Butchart Associates, an IFA authorised by the FSA.
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HM Revenue & Customs says it will contact all clients receiving income from a retirement annuity who will be hit by changes to the way their annuities are taxed next year.
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