The logic that there is a large and growing retired population with inadequate pensions, no meaningful savings, yet a significant asset in the shape of their house has persuaded commentators to predict growth in the market.
Why am I now confident that things are about to change? It is because, although the arguments are largely the same, the people making them are different. As well as the usual product providers, advisers and industry spokesmen, the debate is now also being held with Parliamentarians and interest groups.
This change is being driven by the realisation that the country can no longer afford the growing social care bill for current and future ageing populations.
This is an issue which will only grow in importance as the older population continues to rise and at the same time live longer, as estimates suggest a massive demographic challenge which will be faced by the adult social care system, with the number of 100 year-old people projected to rise from 10,000 today to 1m by 2071.
At the same time the young are struggling with university fees, housing costs and public debt. I believe they have enough problems funding their own lives, without shouldering higher taxes to meet the social care costs of the elderly. Not only are the very oldest the fastest growing segment of our population, many (as a result of record house price inflation and final salary pensions) have the means to pay for themselves.
The industry itself is regrouping to face the changes ahead. The new Equity Release Council, chaired by former shadow pensions minister Nigel Waterson, will provide a focus for the industry and powerful representative platform, while Chris Pond’s appointment as chairman to the SHIP Standards Board will continue to reinforce confidence in the integrity of the sector.
A former MP himself, Chris has credentials in consumer protection having been head of consumer affairs at the Financial Services Authority. I am confident that under this leadership the Equity Release Council will provide a voice for the equity release sector, and seize the opportunities that are currently taking shape.
Until very recently politicians shied away from the sensitive issue of using housing as a source of funding for retirement income. But this is now changing – the Social Care White Paper announced the introduction of Universal Deferred Payments, where local authorities would loan money to pay a person’s social care fees with the cost being recovered from the sale of their property.
There are a range of issues which must be reviewed before it is offered universally, and advisers should therefore continue to consider a range of other options including equity release.
However, what is important is that the role of housing as an asset class to pay for long term care has been recognised by government. This marks an important watermark for this asset class among politicians who previously have been resistant to the use of housing for funding care fees.
Equity release has survived some difficult times, but it is now here to stay and will continue to gain recognition as a valuable and established source of income in retirement.
With the increased public focus on the sector I expect to see the high street providers return to the market and this will provide the capacity and distribution needed to drive the growth we have all been expecting for so long.
Ged Hosty is managing director of equity release at Partnership
