In the 2014 Budget, George Osborne removed the requirement for retirees to purchase an annuity with their pension pots. This freedom, to be implemented in April next year, opens up choices for older consumers in terms of how they spend their savings.
These new choices have led to concerns that reserves may be frittered away forcing many to turn to their homes to release cash to live on.
But Colin Payne, associate director at Chapelgate Private Finance, said there needed to be a boost in those qualified in equity release products to cope with this demand.
He said: “There will need to be a broad-broker base to deal with the increased level of enquiries and at present it is doubtful that sufficiently qualified advisers will be able to provide the service required.
“Many mainstream brokers are able to deal with complex mortgage enquiries but many are not equipped to provide advice on equity release. The industry needs to work harder to incentivise brokers to obtain these qualifications.”
Some networks insist equity release enquiries are referred to a specialist partner which gives the broker no reason to take on extra training so they themselves can give the advice.
“Whilst I can understand a network being concerned about skill decay, with the new reforms and the continued assistance that interest-only borrowers will need in this area, enquiries will certainly grow.”
Steve Smith, mortgage consultant and compliance oversight at Springtide Capital, raised concerns about skill shortages among retirement planners.
“Lifetime mortgages cross over with retirement planning and there are very few retirement planners who also do mortgages and lifetime mortgages,” said Steve Smith.
“If a client has a large pension pot and a large unencumbered property I think that it is difficult to get someone who can advise on both pensions and lifetime mortgages since the pension advice needs specialist exams and is covered by the Retail Distribution Review, mortgages sit outside this regime.”
The Institute of Financial Services (IFS) offers a combined mortgage and equity release qualification, the Certificate in Regulated Equity Release, which advisers receive after completing the three CeMAP modules and an extra module on equity release.
A spokesperson for the IFS said the development of a new qualification is led by the needs of the industry.
“In some cases we identify those needs ourselves and in others it is the industry which approaches us. Of course the other driver of programme development is the qualification requirements set out by the Financial Conduct Authority for various regulated functions.”
An argument for keeping mainstream mortgage advice, equity release advice and pension planning as separate specialisms is to avoid the dilution of expertise which the individual sectors hold.
Chairman of the Equity Release Council Nigel Waterson said the question of combining qualifications was ‘interesting and certainly worth debating’ but it had to be managed in a way which did not erode the quality of advice provided.
“The entire financial services industry needs to help the public get an overall picture of the full range of options in retirement planning. The government guidance guarantee could be the first step in acgieveing this but customers should then be sign posted towards independent financial advisers to receive expert advice.”
