"It’s important that we continue to raise awareness of the consumer safeguards that the Council has put in place to protect customers. "
FR: What are the Council’s main aims or focuses for 2019?
Consumers and opinion formers are recognising that property wealth has an increasingly important role to support finances in later life alongside pensions, savings and other assets. Property wealth provides consumers with alternative sources of financing to meet a broad range of social needs in later life from providing intergenerational support to family members to enabling people to live for longer in their homes when they have greater care needs.
We want to ensure consumers and policy makers recognise the social value that equity release can provide people in later life but also that they understand the importance of the safeguards and protections that the Equity Release Council requires of its members. This provides trust among consumers that equity release is safe. Equity release is not a ‘silver bullet’ solution for everyone, but for some it offers the right solution. Equity release is not sold – it is advised!
FR: What do you consider the main opportunities and the potential risks in the current market?
One of the main opportunities is the growing product innovation we are witnessing in the market, leading to greater flexibility enabling equity release to meet homeowners’ increasingly wide-ranging and complex needs in later life.
This innovation has played an important role in the steady growth of the equity release market, as the number of product options available has more than doubled in two years. As of August 2018, 139 product options were available to consumers, more than double the number (58) seen two years ago in 2016 and up from 24 in 2007. Now 80% of all products offer options to make early and partial repayments without penalty. Others include: options to receive regular monthly income from housing wealth to boost other sources of retirement funds, such as the state pension and private pension savings, options to pay interest each month (rather than rolling up interest) with no risk of default and flexibilities for customers wishing to downsize in future or guarantee a minimum inheritance to leave behind.
As competition continues to grow, we can expect even more product evolution to meet growing consumer needs. This market growth and product development requires the Council to continue to review its standards to ensure they remain fit for purpose. Innovation must go hand in hand with consumer protection.
FR: What advice would you give to intermediaries who are new to the equity release market?
I would urge new intermediaries to recognise the importance of taking a rounded approach to later life financial planning. This is particularly important as customers navigate their way through a growing range of product choices, including retirement interest-only mortgages. Appropriate advice, guidance and support is needed to weigh up the various benefits, costs, flexibilities and protections offered by different products and financial solutions to ensure they are suitable to meet customer needs both now and over the course of their retirement.
Customers must be aware of all the options available to them when deciding how best to support themselves and their families in later life, taking all their assets – including pensions, savings, investments and property – into consideration.
Many advisers I have spoken to have commented on the responsibility that providing later life advice carries but also highlight how satisfying it is to be able to add real value to their customers and their families. As I mentioned earlier, equity release is advised - not sold.
FR: How can the equity release sector continue to improve its image with consumers and how can the sector continue to improve?
It’s important that we continue to raise awareness of the consumer safeguards that the Council has put in place to protect customers. Underpinning consumer trust in the equity release sector are the standards and protections that the Council requires its members to comply with. Equity release products are among the most highly regulated financial products in the UK. Our member customers enjoy three levels of protection when they take out an equity release plan - structured and regulated independent financial advice; independent face-to-face legal advice; and clear product safeguards including security of tenure, fixed interest rates and a No Negative Equity Guarantee. These robust safeguards have played an important role in ensuring that equity release is the FCA’s least complained about home finance product.
The industry has evolved considerably in terms of flexibility and affordability, with a growing range of products at historically low interest rates and with consumers now having the option of repayment flexibilities and inheritance guarantees. Continuing to encourage this level of flexibility will be a key priority for us as we drive best practice across the industry.
FR: What products do you foresee entering the market in the near future, and will equity release ever be considered ‘mainstream’?
The continued steady growth of the market suggests equity release has entered the mainstream of financial services. During 2018 50p was released from the value of people’s homes for every £1 of savings accessed through pensions freedoms, highlighting the important role that property wealth plays in retirement.
Coupled with nearly 50% year-on-year growth of the Council’s membership, this has meant that equity release products are increasingly featuring in conversations among an ever-wider cross-section of consumers and advisers in the UK. The introduction of the market’s first regular income-paying products within the last six months suggests that there is no sign of product innovation slowing down any time soon, which will continue to broaden the appeal of equity release.
FR: If you could see one headline about equity release in 2019, what would it be?
'Equity release should be on all retirees’ checklist'. Equity release will not provide a solution that will suit everyone, nor do we ever expect it to. However, I believe those approaching retirement or in retirement should think about their accumulated assets and savings holistically, factoring property wealth into their retirement planning. It may be that many retirees then decide that unlocking their housing wealth is not a suitable option for them, but at least they have considered all the options available as they plan how they will fund a long and hopefully enjoyable retirement.
