Redmill Week 2 Flashcards
Who is the FCA responsible for, from both a conduct and prudential perspective
The FCA is responsible for the conduct of ALL firms in the financial services sector. And they are responsible for the Prudential regulation of smaller firms.
True or false, the Prudential Regulation Authority and Financial Policy Committe are part of the Bank of England?
True
Which part of the FCA handbook applies to all firms?
Principles for Business (PRIN)
Which FCA sourcebook is key to equity release?
Mortgage and Home Finance Conduct of Business Sourcebook (MCOB)
Do FCA sourcebooks provide rules or guidence?
FCA sourcebooks provide guidance
Are all equity release arrangements in the UK regulated?
Yes they are
Which 3 key changes happened following the MCOB revision in line with the Mortgage Market Review (MMR)?
- A shift from earnings multiples to affordability-based lending
- Outlawing self-certification mortgages
- Protecting those in arrears from punitive changes that would make things worse
How does MCOB apply to directly authorised firms?
The firm will be responsible for ensuring that all MCOB requirements are met
How does MCOB apply to Appointed Representatives?
The authorised firm (principle) will be responsible for the compliance.
What are the requirements for an equity release contract to be regulated under MCOB?
- Loan is made to either an individual or trustee
- Secured by first legal charge
- At least 40% if the property is used as a dwelling by the borrower or related person
Which type of buy-to-let contracts have regulated protection?
Consumer buy-to-let
What is the minimum reflection period for a mortgage?
7 Days minimum
Which is exempt from the Mortgage Credit Directive (MCD)? Lifetime mortgages or Home Reversion
Lifetime mortgages are exempt from the MCD
How does the FCA regard the risk of equity release products?
They are regarded as high risk
Who should valuations for equity release purposes be undertaken by?
A competent and independent valuer
Information for customers in equity release should be given information in a durable medium. What does this mean?
This means that information should be provided in a way in which it cannot be altered
Is cold calling permitted for equity release?
No cold calling is permitted
An adviser should take particular interest around committed expenditure when considering equity release, what is committed expenditure?
Permitted expenditure is expenditure that cannot be altered such as council tax
If more than one product is equally suitable, what three ways must an adviser justify the recommendation by?
Either
- Selecting the cheapest option
- By availability
- Other added-value features important to the customer
When must a firm provide an illustration for equity release?
Every time advice is given or where a customer is seeking execution only
How accurate must a lifetime mortgage illustration be?
Illustrations must be no more than the greater of 1% or £1 below the actual figure charged by the lender
How must the APR for a lifetime mortgage illustration be rounded?
Must be rounded to one decimal place and cannot be understated by more than 0.1%
When must the exact payments be specified on a lifetime mortgage illustration
If the payment is more than £250
What is a ‘transfer of equity’?
Adding or removing a party to a lifetime mortage
What are the 5 key SHIP Standards form the Equity Release Council
- Lifetime mortgage rates but be fixed, or if variable subject to a cap
- No negative equity guarantee
- Right to remain in property for life or entering LTC
- Portability of arrangement
- Right to independent legal advice
What provisions does the Consumer Rights Act 2015 set out?
Sets out provisions for handling faulty or inappropriate goods and services, unfair contract terms and uncompetitive practices
What impacts ones means tested benefits?
Level of income and capital
When may capital raised from equity release not jeopardise means tested benefits?
When the money released through equity release is used for ‘reasonable expenditure’
What are some types of ‘reasonable expenditure’
- Essential property repairs
- Repaying loans
- Helping family members in severe financial distress
Is Universal Credit affected by Equity Release?
Yes universal credit is affected by equity release
Is the state pension affected by equity release?
No the state pension is not affected by equity release
Is universal credit means tested or taxed?
Universal credit is means tested, but not taxed
Pre and post what age determines the amount of universal credit one is entitled to?
Pre or post 25
What is the first type of sick pay payable and how long for?
Statutory Sick Pay (SSP) and this is available for up to 28 weeks
When may Employment and Support Allowance be suitable
After the end of the 28 week statutory sick pay (SSP) period or those who are self employed
What are the two types of Employment Support Allowance?
- Contribution Based ESA
- Income Based ESA
Is Income based ESA taxable and means tested?
Income based ESA is means tested but tax free
Is Contribution based ESA taxable and means tesetd?
Contribution based ESA is non-means tested and taxable
Which type of ESA is potentially affected by Equity Release
Income based ESA is potentially affected by Equity Release
Is Attendance Allowance and PIP affected by equity release
No, AA and PIP is not affected by equity release
What is the maximum Bereavement Support Payment for someone entitled to child benefit or was pregnant at time of partners death
£3,500 lump sum and £350pm for 18 months
What is the maximum Bereavement Support Payment for someone not entitled to child benefit
£2,500 lump sum and £100pm for 18 months
There are two types of job seekers allowance, contribution based JSA and income related JSA. Which is impacted by equity release?
Only Income related JSA is potentially impacted by Equity Release
How long is contribution JSA payable for? and what happens after the end of this period?
Contribution based JSA is paid for 26 weeks. After this period, they will be assessed for income based JSA
Which form of pension credit is potentially affected by equity release
Both forms are potentially affected
What is the maximum Disabled Facilities Grant?
£30,000
How may equity release have an impact on income tax?
Funds realised from equity release sat in a deposit account may attract interest and may attract income tax.
How may equity release impact IHT
Assuming that the money raised from equity release is spent, the estate will fall in value
When must advice for equity release be given?
When there is any kind of dialogue for the loan to be used for debt consolidation
How long should records of advice be retained for?
3 years from the date of the recommendation
How long is the assessment phase for ESA?
13 Weeks
Who is Jobseekers allowance payable to?
Those who are out of work, but looking for work
Who sets the rules for council tax reduction?
Each individual local authority
Who is legally liable for SDLT?
The provider is legally liable for SDLT, but this is factored into any equity release, essentially passing the cost on to the customer
