Stuart Wilson is channel marketing director at more 2 life
Just when you think you really know this industry, you learn something that takes you completely by surprise.
Just recently, I was sat in Committee Room 10 in the House of Commons to attend an event hosted by the Equity Release Council. It was the launch of their latest White Paper entitled ‘Equity release rebooted: the future of housing equity as retirement income’.
One of the panelists and speakers was Dr Louise Overton, a lecturer in Social Policy and member of CHASM (the Centre on Household Assets and Savings Management) at the University of Birmingham.
Among the many interesting insights Dr Overton shared with us was the way in which some people still have a sense of shame or even guilt about taking out equity release – feelings that may prevent them from pursuing it as an option or, at the very least, ensure they keep it as a secret from family and friends until their dying day.
Could this be true, I thought? Are clients really ashamed at having considered – never mind taken out – an equity release loan? Perhaps once, many years ago, but surely today people don’t feel as though they are committing some sort of sin by releasing equity from their home to fund their retirement?
By chance, I was with a group of equity release advisers the very next day and I had my answer.
One adviser told me of a client he had been to see recently, a widow scraping by on a basic State pension, eager to boost her modest retirement finances with a small (£50,000) loan. Her property was worth about £500,000.
She had two sons – one was all for the idea of her getting the loan and having a more comfortable retirement. The other, however, was not. So much so, he had even threatened to never speak to his mother again if she took out the loan.
Now, I can only surmise as to this son’s rationale. The cynic in me says it’s all about greed and he could see ‘his’ inheritance slipping away to the equity release lender. On the other hand, perhaps he has heard and believes the stories about ‘rip off’ equity release and is genuinely worried about his mother’s financial wellbeing, to the extent that he feels he has to threaten their very relationship in order to underline just how bad a decision he thinks this is: the desperate last act of an overly-protective child.
Either way, this story saddens me. Here we have the perfect example of the very client for whom equity release could have been modeled. The ‘asset rich, cash poor’ retiree with little or no pension provision beyond what they get from the State and nothing of value to fall back on…apart from a half-a-million pound home.
There are thousands of clients like this lady throughout the UK. Tens of thousands. People who desperately need the cash their home could provide but who feel awkward, ashamed and even guilty at the prospect of financing their retirement at the expense of an inheritance for their loved ones.
While the importance of involving family members in the decision-making process is hammered home by specialist advisers in this market, this story also highlights the paradox this can trigger: the very people being consulted could end up being the ones who, for their own often selfish or misguided reasons, persuade a parent or grandparent to steer clear of the lending they so desperately need. So the discussion is not so much ‘what sort of retirement can I have?’ as ‘what sort of inheritance will you leave me?’.
For me, these recent discussions have underlined how much more there is to do in order to make equity release a ‘mainstream’ financial solution. Taking out a residential mortgage is regarded as normal but taking out a lifetime mortgage is still seen as “abnormal”.
The importance of advisers in this process has never been more obvious to me. They are the key to educating clients and their families about the benefits of equity release, as well as dispelling the deep-rooted myths.
The wider industry and government has a role to play here, too. Equity release must be positioned as a viable, safe and accessible solution for all. Consumers should be signposted to equity release as part of their retirement planning thought process through government-backed services such as Pension Wise. And lenders could do more to develop and promote features that help alleviate concerns of children such as inheritance protection features.
The market is growing rapidly and could double in the next few years. That’s great news for the industry and of course the clients benefiting from their loans. Equity release is virtuous, not sinful. We need to land that message, and fast.