Later LifeSep 21 2017

FCA calls for government action on long-term care advice

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FCA calls for government action on long-term care advice

The Financial Conduct Authority has called on the government to act on the issue of long-term care advice and products to avoid people sleepwalking into a harmful or vulnerable old age.

In a paper on the ageing population, the FCA identified a number of issues facing the financial services sector.

Its research found the cost of long-term care in England is “substantial”, averaging around £28,000 a year and reaching £38,700 a year if nursing care is needed.

The FCA has said this cost is likely to increase over time and without adequate financial planning or provision for long-term care, consumers may experience poor outcomes, harm or vulnerability.

But some in the industry also warned the regulator about a limited availability for insurance products and savings vehicles for long-term care.

The regulator said providers may be put off from entering this market because of uncertainty around government policy and a lack of interest from consumers who have many misconceptions about long-term care.

In its paper the FCA said: “In light of this uncertain landscape, and lack of consumer demand, we recognise that there is limited appetite for the financial markets to intervene to create products and services to support the funding of long term care.

“Given the wide ramifications of policy in this area, we believe these are properly issues for government and parliament to address rather than the FCA.

“What the FCA can do is continue to look at the financial services parts of this market and whether consumer harm is arising.

“Where we see detriment, we will flag this to government and parliament where appropriate.”

On average, across the UK, 41 per cent of care home residents are entirely self-funded, 37 per cent are funded by the public purse, and others self-fund part of their care or receive other funding.

It is estimated where self-funders run out of money, this costs the state around £425m.

But the FCA said there is a common misconception that care is government-funded as part of the NHS and there is evidence of a perception among older consumers that their families and homes will provide financial support for care they may need.

The FCA’s paper also found issues in the mortgage sector, particularly in relation to lending into old age.

These included opaque and complex lending criteria, which may prevent older consumers from accessing a mortgage product, the limited appetite among some lenders for later life lending, and the lack of innovation.

The FCA’s data found the total amount of mortgage debt held by over-65s is projected to almost double from £20.1bn to £39.9bn by 2030 as a result of people buying later in life.

One of the issues the FCA found was that while some lenders have been increasing their upper age limits, these are sometimes not sufficient to allow lending to older borrowers.

The FCA said: “It may have limited impact on lending volumes if applied in isolation, due to other potential constraints in the affordability test.

“Firms may be unnecessarily limiting themselves, and older borrowers, by having rigid policies or systems and controls that are unable to consider individual circumstances, potentially resulting in unintended exclusion of credit-worthy consumers in the target market.”

The FCA also looked at lasting powers of attorney and found that in 2016/17 648,318 of these were registered with the Office of the Public Guardian in England and Wales, an 18 per cent increase on the previous year.

But the regulator said there is still a problem with engagement in this area, with too many people relying on informal workarounds such as sharing their PINs and passwords with a loved one.