News Review: Equity Release


The long-term care saga continues apace


by Andrea Rozario, director general, SHIP


one of the biggest issues facing the retirement industry at the moment is how the country will pay for long-term care. at the start of July, andrew


dilnot revealed the findings of the commission into the funding of long-term care and support, established by the government almost a year ago.


it has been


clear for some time that the current care model is not sustainable – the state cannot afford to pay the care costs for everyone who might need it, and so alternative options have to be explored. the


commission


recommended capping the amount an individual has to pay for their own care at £35,000, plus an estimated £7,000 to £10,000 per year accommodation


has to step up and play a part in helping consumers to navigate the care system. the report highlighted


costs,


with suggestions that the government supplement any further costs. the report also said that the cost of care should not exceed 30% of a person’s assets. this means that the responsibility of paying for care is shared between the government and individuals, rather than relying on just one party to fit the bill.


Consumer awareness Whilst this report offers an opportunity for industry there are still issues to address, and now the financial services industry


the need for a working group between industry and government which would offer the chance for industry to help influence the much needed changes in our care system and to develop products that fill a growing need. greater consumer awareness was also highlighted and the report recommended a public awareness campaign, both of these suggestions are exactly what SHiP has been asking for over the last couple of years. People of all ages are finding their finances placed under great pressure due to high levels of inflation and an uncertain job market. consequently they have to prioritise their financial needs, and for a vast number retirement planning falls to the bottom of the list due to the belief that there is plenty of time to save for it. For people of all ages,


the best way of coping with financial stresses and strains – whether it is how to pay for daily expenses, or how to build up a retirement income – is to speak to an adviser. Last month, aviva’s Value of Financial advice report revealed that people are far more likely to turn to the internet or friends and family for financial advice, than actually speak to a professional. according to their research people are increasingly likely to speak to an iFa as they get older. on some levels this is encouraging, as it means


14 mortgage introducer AUGUST 2011


“There are likely to be many people who would not even take equity release into consideration though it might be an option for them, purely because they are unaware of its benefits”


that people are aware of the need to take action and organise their finances as they approach retirement. However, it could be argued that financial advice is vital for people who are just starting out as they can make significant ‘life-changing’ financial errors!


Understanding While (you might hope) that many people have a


general understanding


of different financial products, they are unlikely to have the same level of knowledge as an adviser or iFa, who will be able to outline all of the options and recommend which ones are best suited to their individual circumstances. With the impending retail distribution review (rdr) likely to cause a fundamental shift in the intermediary world now is the time to communicate the invaluable benefit of seeking professional advice. over the past year SHiP


has carried out research amongst consumers to find out their perceptions of equity release. For those who would not consider releasing the equity from their home, one of the main barriers is a lack of understanding and knowledge about the products and the process involved. this is exactly the sort of area in which an adviser could help – there are likely to be many people who would not even take equity release into consideration (even though it might be an option for them), purely because they are unaware of its benefits. as pointed out in the


dilnot report, this is a real opportunity for the financial services industry to step up and work with the government and consumers to ensure that their questions are answered. it is essential that information is accessible and easy to understand, especially for those who still intend to plan their finances without seeking advice from an iFa.


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