Chris Prior is manager, sales and distribution, at Bridgewater Equity Release
The latest equity release lending figures released this month by the Equity Release Council provide an understanding of the developments in the sector over the last 12 months and certainly outline the increasing demand for equity release products.
We already knew that the £1bn lending figure of 2013 had been breached by the end of quarter three last year and it was further positive news to see lending levels almost reaching £1.4bn for the full year end. The 29% year-on-year increase was certainly not to be sniffed at; neither was the fact that £1.38bn was the largest lending level since records began back in 1992, outstripping 2007’s £1.21bn.
Of course, attention now turns to the year ahead and my own opinion is that it will not be surprising to see lending levels getting close to, and potentially out-stripping, the £2bn mark by the end of 2015. Certainly, all the demographics and market demand drivers that saw such a strong boost last year are still in place and, indeed, the wants and needs for those 55-plus to access the equity in their homes is likely to grow and grow.
I believe this is a seminal moment for the sector as we finally begin to cast aside those misconceptions and misapprehensions about equity release, and home-owners begin to acknowledge that, in a number of circumstances, accessing their property wealth is the right option to take.
What will also facilitate such increased activity is consumer education but also, if it is going to be done correctly, the ‘Pension Wise’ guidance that will be offered to all new retirees from April. At present, the fundamentals of what guidance actually entails are still unknown – indeed, concern was raised just this week about the low number of Citizens Advice Bureau (CAB) offices across the country which will house Guidance staff in order to meet pensioners face-to-face. We believe that (at the moment) only 44 locations are available and, if this is the case, then this is certainly worrying as the geographical spread is not what it should be.
However, pensioners can also access guidance online and over the phone, so we hope this small number of face-to-face points of delivery will not be off-putting to pensioners. The content of that guidance is also under review but it seems obvious to me, and I would think everyone working in the later life advice sector, that it should (at the very least) actively cover the property wealth the retired individual holds, and provide information on the potential ways it could be utilised.
Of course, we’re not suggesting that those who provide Guidance push the equity release option but we would expect them to look at the equity available within the house and inform the individual concerned that there are options to release cash from the property.
This goes for any adviser dealing with a post-guidance individual as well – given the fact that trillions of pounds of property wealth is available to the retired and other options may not be feasible or practical, advisers certainly have a duty to take into account the home and what might be achievable through perhaps an equity release product.
My point is that ‘Pension Wise’ or subsequent post-Guidance advice that is sought out should not just be about the pension. It should cover every single asset that the individual has and those concerned have a duty to highlight all the options that are available to the individual, not simply drawing down the entire pension pot as cash as some parts of the media appear to be fixated on. After all, would it be better for a newly-retired individual to draw down their entire pension pot, with the potential tax sting that accompanies it, or would they be better taking a cash lump-sum in the form of equity from their home which comes with no tax burden?
These are all options that need to be actively discussed and highlighted and I believe that, first up, the Pension Wise guidance staff should be doing this and, secondly, any adviser who deals with a client in this situation should also be actively helping the client understand their options in this area.
This should all be about holistic financial guidance and advice, not simply a consideration of one area at the expense of all others. If we can get this right, then the clients have a much better chance of getting the most out of this new system and they will hopefully not feel short-changed or aggrieved that certain avenues appeared closed to them, further down the road.