When we all search for clarity, the unfortunate reality is that retirement can be disorientating process. As ‘pension freedom day’ approaches, thousands of retirees are due to be met with the most open market in a century. However, with this flexibility and freedom may come confusion caused by the varied choices now available.
For providers and advisers alike, the essential goal must be to create a clear picture of the choices retirees have. By ensuring that passing on knowledge to our customers is at the forefront of everything we do, we can protect the customer and ourselves. In terms of equity release, despite much progress and rising customer numbers, there still exists misinterpretations that remain prevalent.
According to an Aviva study of last year, over 25% of 1,200 homeowners surveyed believed that equity release involved selling their home, and not a loan-based lifetime mortgage. 46% said they would not consider equity release because they wanted to protect their inheritance, despite many equity release plans including inheritance protection options.
Furthermore, only 15% said they would consider using equity release, yet more than a third said that they believed there were real benefits to tapping into housing wealth. These misconceptions about equity release have become entrenchedas most respondents felt they had a ‘strong understanding of equity release’, 82% replied as such.
To help confused retirees make the best financial decisions possible in their retirement, these misconceptions about equity release must be overturned. Many people seem to be confusing lifetime mortgages with home reversion plans, despite home reversion plans currently occupying a miniscule amount of the total market (under 1% to be precise).
It is a shame that 25% of customers see equity release as solely revolving around this fringe product, and this misunderstanding could lead to many who could benefit from equity release missing out.
Misconceptions about our industry are deeply rooted in the customers’ psyche; exacerbated by the shadow of the failures of the 1980s and 90s Home Income Plans, and the often over-simplified scaremongering of mainstream journalism.
Equity release is, of course, not ideally suited to everyone. However, despite this, unbiased understanding of equity release is of paramount importance to allow all retirees a fair opportunity to review the possible benefits of the lifetime mortgage. With ‘pension freedom day’ only weeks away, we must all attempt to convey an unbiased, impartial account of all areas of retirement planning.
Whilst it can be said that equity release can appear to be a complicated product, oversimplifying this, or any other financial product for that matter, helps no one and only serves to create the disorientating atmosphere that leads to poor decisions. Therefore, clarity and clear explanation are key to helping people understand all their choices in retirement, which is why the adviser is pivotal to the process.
