FPCOB 11.1 Application and purpose
Application
1This chapter applies to a firm in relation to funeral plan provision and funeral plan distribution.
Purpose
1Principle 6 requires a firm to pay due regard to the interests of its customers and treat them fairly. A firm is also under an obligation to comply with the customer’s best interests rule and, as a consequence of this sourcebook’s customer communication requirements, to communicate information to customers in a clear, fair and not misleading way. This chapter reinforces these requirements by preventing a firm from imposing fees which amount to profit.
Instalment payment fee
1FPCOB 11.1.4R applies to a firm that charges an instalment payment fee.
1A firm must not impose an instalment payment fee on a customer unless it is equal to or lower than the aggregate of:
1A firm must be able to objectively justify that the calculation of the instalment payment fee does not include profit above that which the firm would make, or which would have been generated by trust arrangements or insurance-based investment products, if the customer paid for the funeral plan contract in a single payment.
1For the purposes of FPCOB 11.1.4R(2), ‘lost investment gain’ refers to a reasonable estimate of the difference between:
- (1)
the investment return that instalment payments under an instalment payment funeral plan will make when invested under the trust arrangements or insurance-based investment products over the period of time that instalments in that plan are agreed; and
- (2)
the investment return that would have been expected from the customer’s payment if the customer had paid for the funeral plan contract in a single payment at the date the funeral plan contract was entered into and that payment (less any charges or deductions the firm would ordinarily have made) had been invested under the trust arrangements or insurance-based investment products for the period of time used when estimating the amount in paragraph (1).
Other fees
1A firm must ensure that any fee, other than an instalment payment fee or FP distribution charge2, imposed on a customer is based upon a reasonable reflection of the costs incurred by the firm, in providing the service to which the fee relates, and not with a view to profit.