News Review: Equity Release
Politicians must acknowledge impact of ageing society
by
Andrea Rozario
director general, SHIP
So david cameron is Prime minister. What will be in- teresting over the coming months is to see exactly how this new con/Lib coalition government will work. equity release itself is in a
time of change exaggerated by the economic climate. Prod- ucts, providers and customers are all evolving and their re- quirements are changing. it is my view that equity re-
lease will become more flex- ible and mainstream, with products that are tailored to particular purposes such as domiciliary care. While many of the current safeguards sup- port vulnerable customers, it
New figures show that the number of complaints about equity release recorded by the Financial Services Authority has dropped from 428 to 383 in H2 2009. While of course, we don’t want any complaints and SHIP works closely with the FSA and the Financial Ombudsman Service to avoid these, it is good to see that these have fallen when those against mortgage firms have actually increased (H1 2009: 12, 634 to H2 2009: 13,232).
is necessary to acknowledge that going forward consumers may choose different prod- ucts and it is possible that safeguards will evolve to cover a variety of customer needs as hypothesised in the SHiP discussion paper issued last summer. Politicians must acknowl-
edge the impact our ageing society is having - and for the
immediate future will contin- ue to have - on the economy. not only this, but the balance between how much our cur- rent retired population have in assets and claim in benefits must be addressed as this affects everyone. the ageing population will rely on the state pension for far longer than was anticipated when it was first introduced and on
The first half of this year saw the equity release market shrink, with total market advances falling by 8%. However, home reversion plans jumped 10% and the total number of customers remained fairly stable. As a whole, the value of equity release advances at the start of 2010 is £213.4m. Considering the fact that some providers have left the market, the continued popularity of equity release products among customers is encouraging and suggests that the gap they left will hopefully soon be filled by new entrants. Indeed, there have been rumblings in the market that some large organisations are likely to offer equity release in the very near future, which will send out a clear message to customers that they can have confidence in these products. This will also likely help large companies see investment opportunities in the equity release sector – a vital ingredient for growth.
Intermediaries continue to play an important role in the equity release market currently accounting for 79% of all sales. And – to my mind – advisers will be one of the key drivers for growth of this sector once any funding issues have been ironed out. Equity release is no longer the product most suitable for those in distressed circumstances but one that we are actively campaigning to be included in normal retirement planning. Therefore, it is vitally important that all advisers who work in the retirement industry have an understanding of equity release and that it is an option they
top of this they have benefited from very high house price in- flation, free further education and defined benefit pensions. First time buyers are still struggling to get on the hous- ing ladder and to increase tax on the slowly shrinking work- ing generation to support an older generation that has so much wealth tied up in their homes seems unfair.
are able to offer to those customers who would benefit from it most.
Failing this, intermediaries should have a network of suitably qualified contacts that they can refer relevant customers to for information. As well as improving the standard of living in retirement equity release can be used for inheritance tax planning or to help younger family members onto the housing ladder – it is (if you can forgive me for repeating myself) not just for the poorer end of the market.
For some advisers, there continues to be a perception of barriers to entering this market. An understandable deterrent is the confusion around our current convoluted benefits system. Hence, last month I told you about our campaign to clarify the relationship between equity release and state benefits. This month the Association of Mortgage Intermediaries, the Association of Independent Financial Advisers and the Personal Finance Society have all expressed their support. We hope to provide access to clear definitive guidelines and rules to make the process easier for advisers and customers. When we have gathered in the information we will then be able to ascertain what the problems are, the extent of the problems and what needs to be done to overcome the issues which will hopefully then lead to the DWP helping to produce a definitive guide that can be used by advisers, customers, DWP staff and advisory charities such as the Citizens Advice Bureau.
10 mortgage introducer JUNE 2010
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