A multi-party group of MPs has called on the Government to regulate the entire equity release market amid fears of a mis-selling scandal.
At a recent Parliamentary debate Liberal Democrat trade and industry spokesman Vincent Cable, Conservative shadow economic secretary Stephen O’Brien and Labour MP Lynne Jones asked Ruth Kelly, financial secretary to the Treasury, for Financial Services Authority (FSA) regulation of the mortgage market to include home reversion plans.
The FSA announced in CP146 that mortgage-based equity release will be regulated in 2004, but that reversionary plans fell outside its Treasury-defined remit.
A Green Paper on pensions, published in December announced consultation on reversionary plans, but the MPs were unsatisfied.
Cable said: ‘These products are aimed at pensioners ‘ among the most vulnerable in our society. As the effect of the pensions crisis bites harder, more pensioners will need to use them to unlock the equity invested in their homes. It is unacceptable that while the sale of some products will be regulated, others will not, meaning some pensioners will be protected, while others will not. There is scope for another mis-selling crisis ‘ and the Government knows this.’
Pointing out that the market needed clarification, safeguards and protection for pensioners, O’Brien said: ‘The Government’s recent pensions Green Paper is woolly. A paragraph in a green paper is not a substitute for action ‘ the Government must spell out what it intends to do and the timetable for introducing the necessary protection.’
There are signs the Government has already made its mind up over a certain degree of regulation.
In her reply to the MPs, Kelly said: ‘We have started to meet interested parties and gather evidence of possible, or likely, consumer detriment before decid-ing on the degree of regulation. We do not want to over-regulate.’
She added if the Government went ahead with the regulation of reversionary plans, then a consultation paper would be published.