News Review: Equity Release
The elderly and retirement funding must not be forgotten SHIP campaign
by Andrea Rozario director general, SHIP
christmas is nearly upon us. However, amidst all of the jollity and encouragement to spend over the festive season, we are still waiting to feel the full extent of the aftershocks following the comprehensive Spending review. For months we had been
told to expect the worst and that we were entering a new age of austerity. many had braced themselves for far worse, however, that is not to say that the cuts will not be keenly felt by some of the more vulnerable groups within society – possibly not directly, but as a knock-on effect of spending reductions elsewhere. in an attempt to reduce
expenditure, around 490,000 public sector jobs have been cut across a wide number of industries and departments. i am deeply concerned about how these cuts will affect the services upon which older people depend. the chancellor announced that the nHS Budget will increase every year until 2015 – yet it will be up to local authorities to allocate funding to social care, and i hope that they are not pushed to make reductions to their spending in this area.
Funding care dr ros altmann, director general of Saga, has warned that the problem of funding care could have even greater financial ramifications than the pension’s crisis. With an
increasingly aged population - many of whom do not have sufficient income or savings to see them through retirement - there needs to be a very serious attempt to address the issue of who will pay for later life care. a care crisis may be the
more newsworthy and pressing issue, but let us not forget the difference that simple information can make to older people. With so much change taking place, the government must ensure that all of the proposed cuts are fully explained and communicated with people of all ages. most of us are so used to
turning to the internet for answers and updates that it can become easy to assume that is the only channel of information available. However, many older people are not as
technologically-savvy
and might struggle to fully understand the implications of the changes. as a result they could find themselves missing out on benefits that they are entitled to, through a simple lack of awareness.
Opportunities the government’s tightening of its belt provides the equity release market with an opportunity to grow and show how it can help to play a significant part in the funding of retirement. in the past month, SHiP released its figures for the third quarter of 2010, which were extremely encouraging and pointed to increasing consumer confidence in the market. the equity release market grew to £205m, from £196.7m in Q2 2010. this followed several successive quarters of contraction and
10 mortgage introducer DECEMBER 2010
illustrated how people are turning to the equity tied up in their homes to help to fund their retirement, possibly in response to the cuts and streamlining of state benefits and services. Key retirement Solutions
also published its own figures, which dispelled the myth of the “average” equity release customer as struggling on the brink of poverty. instead, almost two-thirds (63%) were using the wealth they had accessed to make improvements to their home or garden, compared with 43% in the comparable months of last year. People are far more aware of the value of investing in their own home, and wish to enjoy living in their property. aside from the potential financial benefits of including property in retirement planning, it demonstrates the value people place upon making sure their home is a comfortable environment in which to live.
Stark reality For most of us, the festive season is a time for indulging (both financially and gastronomically) and it is very easy to put off thinking about more saving and planning for retirement. However, these problems will not go away, and i suspect that once christmas is over and the stark reality of the cuts strikes there will be a very serious need to consider alternative sources of retirement funding. i hope that with the new Year equity release is one of these, and that we continue to see growth in the market as people come to understand the options open to them.
For several months now I have referred to SHIP’s campaign for the clarification of the relationship between state benefits and equity release. Earlier this year, we called upon intermediaries to complete a survey detailing their experiences of advising equity release customers in receipt of state benefits, in order to find out the sorts of problems they had encoun- tered as part of the process. The research found that the complexity of the benefits system, and the variety of guidance available from different sources has led to confusion. Over a half (51%) of equity release customers are missing out on benefits they are entitled to. Con- sumers who are confused about their level of entitle- ment understandably turned to financial advisers for help – yet an overwhelming number of them (91%) pointed to a lack of clear and consistent Government guidance as an obstacle to providing advice on the impact of releasing housing equity upon state benefits. The results of the re-
search have been analysed by a Working Group, led by Baroness Hollis, and we will soon be publishing details of their conclusions and suggestions for reducing this confusion going forward. One of the easiest ways of reducing expenditure is for the Government to pro- vide clear, simple guidance wherever possible, so that it is easily accessible for people as and when they need it.
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