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Equity Release > Redmill Week 2 > Flashcards

Redmill Week 2 Flashcards

1
Q

Who is the FCA responsible for, from both a conduct and prudential perspective

A

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.

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2
Q

True or false, the Prudential Regulation Authority and Financial Policy Committe are part of the Bank of England?

A

True

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3
Q

Which part of the FCA handbook applies to all firms?

A

Principles for Business (PRIN)

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4
Q

Which FCA sourcebook is key to equity release?

A

Mortgage and Home Finance Conduct of Business Sourcebook (MCOB)

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5
Q

Do FCA sourcebooks provide rules or guidence?

A

FCA sourcebooks provide guidance

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6
Q

Are all equity release arrangements in the UK regulated?

A

Yes they are

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7
Q

Which 3 key changes happened following the MCOB revision in line with the Mortgage Market Review (MMR)?

A
  • 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
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8
Q

How does MCOB apply to directly authorised firms?

A

The firm will be responsible for ensuring that all MCOB requirements are met

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9
Q

How does MCOB apply to Appointed Representatives?

A

The authorised firm (principle) will be responsible for the compliance.

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10
Q

What are the requirements for an equity release contract to be regulated under MCOB?

A
  • 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
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11
Q

Which type of buy-to-let contracts have regulated protection?

A

Consumer buy-to-let

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12
Q

What is the minimum reflection period for a mortgage?

A

7 Days minimum

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13
Q

Which is exempt from the Mortgage Credit Directive (MCD)? Lifetime mortgages or Home Reversion

A

Lifetime mortgages are exempt from the MCD

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14
Q

How does the FCA regard the risk of equity release products?

A

They are regarded as high risk

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15
Q

Who should valuations for equity release purposes be undertaken by?

A

A competent and independent valuer

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16
Q

Information for customers in equity release should be given information in a durable medium. What does this mean?

A

This means that information should be provided in a way in which it cannot be altered

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17
Q

Is cold calling permitted for equity release?

A

No cold calling is permitted

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18
Q

An adviser should take particular interest around committed expenditure when considering equity release, what is committed expenditure?

A

Permitted expenditure is expenditure that cannot be altered such as council tax

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19
Q

If more than one product is equally suitable, what three ways must an adviser justify the recommendation by?

A

Either
- Selecting the cheapest option
- By availability
- Other added-value features important to the customer

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20
Q

When must a firm provide an illustration for equity release?

A

Every time advice is given or where a customer is seeking execution only

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21
Q

How accurate must a lifetime mortgage illustration be?

A

Illustrations must be no more than the greater of 1% or £1 below the actual figure charged by the lender

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22
Q

How must the APR for a lifetime mortgage illustration be rounded?

A

Must be rounded to one decimal place and cannot be understated by more than 0.1%

23
Q

When must the exact payments be specified on a lifetime mortgage illustration

A

If the payment is more than £250

24
Q

What is a ‘transfer of equity’?

A

Adding or removing a party to a lifetime mortage

25
Q

What are the 5 key SHIP Standards form the Equity Release Council

A
  • 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
26
Q

What provisions does the Consumer Rights Act 2015 set out?

A

Sets out provisions for handling faulty or inappropriate goods and services, unfair contract terms and uncompetitive practices

27
Q

What impacts ones means tested benefits?

A

Level of income and capital

28
Q

When may capital raised from equity release not jeopardise means tested benefits?

A

When the money released through equity release is used for ‘reasonable expenditure’

29
Q

What are some types of ‘reasonable expenditure’

A
  • Essential property repairs
  • Repaying loans
  • Helping family members in severe financial distress
30
Q

Is Universal Credit affected by Equity Release?

A

Yes universal credit is affected by equity release

30
Q

Is the state pension affected by equity release?

A

No the state pension is not affected by equity release

30
Q

Is universal credit means tested or taxed?

A

Universal credit is means tested, but not taxed

30
Q

Pre and post what age determines the amount of universal credit one is entitled to?

A

Pre or post 25

30
Q

What is the first type of sick pay payable and how long for?

A

Statutory Sick Pay (SSP) and this is available for up to 28 weeks

31
Q

When may Employment and Support Allowance be suitable

A

After the end of the 28 week statutory sick pay (SSP) period or those who are self employed

31
Q

What are the two types of Employment Support Allowance?

A
  • Contribution Based ESA
  • Income Based ESA
32
Q

Is Income based ESA taxable and means tested?

A

Income based ESA is means tested but tax free

32
Q

Is Contribution based ESA taxable and means tesetd?

A

Contribution based ESA is non-means tested and taxable

33
Q

Which type of ESA is potentially affected by Equity Release

A

Income based ESA is potentially affected by Equity Release

34
Q

Is Attendance Allowance and PIP affected by equity release

A

No, AA and PIP is not affected by equity release

35
Q

What is the maximum Bereavement Support Payment for someone entitled to child benefit or was pregnant at time of partners death

A

£3,500 lump sum and £350pm for 18 months

36
Q

What is the maximum Bereavement Support Payment for someone not entitled to child benefit

A

£2,500 lump sum and £100pm for 18 months

37
Q

There are two types of job seekers allowance, contribution based JSA and income related JSA. Which is impacted by equity release?

A

Only Income related JSA is potentially impacted by Equity Release

38
Q

How long is contribution JSA payable for? and what happens after the end of this period?

A

Contribution based JSA is paid for 26 weeks. After this period, they will be assessed for income based JSA

39
Q

Which form of pension credit is potentially affected by equity release

A

Both forms are potentially affected

40
Q

What is the maximum Disabled Facilities Grant?

A

£30,000

41
Q

How may equity release have an impact on income tax?

A

Funds realised from equity release sat in a deposit account may attract interest and may attract income tax.

42
Q

How may equity release impact IHT

A

Assuming that the money raised from equity release is spent, the estate will fall in value

43
Q

When must advice for equity release be given?

A

When there is any kind of dialogue for the loan to be used for debt consolidation

44
Q

How long should records of advice be retained for?

A

3 years from the date of the recommendation

45
Q

How long is the assessment phase for ESA?

A

13 Weeks

46
Q

Who is Jobseekers allowance payable to?

A

Those who are out of work, but looking for work

47
Q

Who sets the rules for council tax reduction?

A

Each individual local authority

48
Q

Who is legally liable for SDLT?

A

The provider is legally liable for SDLT, but this is factored into any equity release, essentially passing the cost on to the customer

Equity Release (4 decks)

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