ERC: Pension Wise must include housing equity

Sarah Davidson

October 21, 2015

The paper – Unlocking the potential: the future of equity release – was launched at a Westminster briefing yesterday and also included a recommendation that HM Treasury take a lead on co-ordinating relevant policy to benefit consumers.

The report also identifies where Government policy could do more to consider equity release as a way of meeting people’s retirement needs, and where regulation is providing direct challenges to the development of the sector.

It argues that a coherent approach across departments is necessary to “avoid unforeseen consequences and ensure the maximum benefit for consumers” and government.

The White Paper includes seven specific recommendations, namely that government should:

1. consider the role of equity release as part of its strategy for addressing the challenges of an ageing society, ensuring that people are able to utilise housing wealth to improve their income and wellbeing in retirement where appropriate;

2. expand the scope of the Pension Wise service to enable users to understand how accessing housing wealth may provide solutions to satisfy their objectives;

3. consider how equity release can be utilised to help people pay for home care – providing financial resources which can help people retain ownership of their home and stay living in it for longer;

4. in conjunction with local authorities and other stakeholders, develop clear pathways for local authorities to use to help people who are seeking support on financing care services understand when they should access regulated financial advice and how they should go about doing so;

5. develop a range of case studies to illustrate best practice on referral to financial advice on care funding, which would complement the guidance on the implementation of the Care Act;

6. use the Financial Advice Market Review as an opportunity to ensure that people nearing retirement are able to access independent financial advice, which allows them to consider the full range of relevant issues – including retirement funding, paying for care, home adaptations and leaving money to children and grandchildren

7. ensure the Financial Conduct Authority’s review of the equity release market is wide-ranging and considers the impact of the regulatory framework on the equity release market, as well as other potential barriers to increasing the size of the market.

Speaking at yesterday’s launch Nigel Waterson, chairman of the Equity Release Council, said: “The equity release sector is growing fast, and is likely to become even more popular in the next few years.

“This growth is driven by a range of factors – so-called “interest only prisoners”, the challenges older customers sometimes face in accessing standard mortgages, and care costs.

“And many over-55s continue to access their property wealth to improve their homes, help family members or enjoy foreign travel.

“It is therefore all the more important that government and regulators do more to encourage responsible equity release. We urge the Treasury to become our sponsor across Whitehall. And we are delighted that the Work & Pensions Select Committee have just in the last couple of days endorsed our view that the Pension Wise guidance be extended to cover housing wealth.”

Lord Lipsey, who also spoke at the event, said: “The government’s sneaked-out decision to ditch all the key Dilnot reforms has dealt a body blow to many pensioners.

“In future it is even more important that government tries to get its act together over equity release, so its potential to help people with their incomes in later years can be realised.”

Dean Mirfin, technical director at Key Retirement, said the average equity release customer is able to unlock in excess of three times the average defined contribution pension pot from their housing wealth to boost retirement income.

He added: “This highlights the contribution that property wealth can make to standards of living in retirement and why it is important that the industry, regulators and government does all it can to support further development in the market.”

Research out today from Retirement Advantage showed the potential wealth available to over 55s through equity release over £350bn.

Alice Watson, product and communications manager at Retirement Advantage Equity Release, said: “The housing landscape is evolving and providing income opportunities for a new generation of people adopting a more holistic approach to their retirement.

“With rapid growth in housing wealth across the country, we expect to see the traditional South East and London-focused success of equity release spreading into the Midlands and East Anglia, as well as continuing north of the border in Scotland.”

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