After HSBC was yesterday hit with a record £10.5 million fine for mis-selling investment products to elderly and disabled customers, more questions were raised about how Britons should save for long-term care.
The Financial Services Authority found advisers had been mis-selling products to 2500 customers with an average age of 83. Some had been recommended products that required a minimum investment of five years, even though they were not expected to live that long. HSBC expects to pay almost £30 million in compensation. If you think you or your relatives may have been victims, having bought an investment policy from HSBC's subsidiary NHFA between April 2004 and 2010, the bank is examining all cases. If you believe you may have been a victim before 2004, contact the bank.
Anyone currently organising long-term care funding should seek advice carefully. Most "self-funders" will need to build up a pool of at least £100,000 to cope with the costs, so opt for a specialist financial adviser. Check out the Society of Later Life Advisers (societyoflaterlifeadvisers.co.uk or 0845 303 2909). You may feel more peace of mind by opting to pay an adviser fees, rather than commission. From 2013, this will be the norm.
The main product to cover long-term care costs is an "immediate needs" annuity. This provides an alternative to selling a family home and using the proceeds to pay for care fees. Savings are used to buy a monthly income. The income is tax-free but once purchased, the capital can't be returned, so if a relative dies early, they may not have recouped the investment and family members could lose out on an inheritance. For an extra premium, part of the capital paid into the policy can be protected against an early death. Providers include Friends Life and Partnership.
