In its paper, Equity release rebooted: the future of housing equity as retirement income, the council lays out a set of measures for the equity release market and government to act on, to build on recent progress made in tackling the retirement income crisis.
Homeowners continue to hold the accumulation of housing wealth in much higher esteem than building up a meaningful retirement pot.
Wealth amassed by homeowners through mortgage capital repayments or lump sum overpayments has increased by 54% from £40.7bn in 2005 to a record £62.7bn in 2016. An average worker potentially repays twice as much in mortgage capital as they do into their pension pot. However, as they approach retirement, many remain unaware of how they can combine housing wealth and pension savings to boost their retirement income.
In a bid to improve the understanding of later life finance options, and to allow a consumer’s housing wealth to be considered alongside pensions savings, the council proposes the formation of a single public financial advice body.
This would replace the existing three government-backed financial guidance providers; Money Advice Service, Pensions Advisory Service and Pension Wise.
Should the government act on this proposal, the council said: “Important questions need to be addressed concerning the knowledge base required for advisers to be able to offer a suitable range of product options for meeting their customers’ aims and objectives, or sign posting to other experts where necessary.”
Mental capacity issues
The paper also proposes that advisers receive ‘well-directed training’ on mental capacity issues which may arise when helping older borrowers. It said that while mental capacity issues can arise at any time, given the demographic of equity release borrowers, it is an area in which the sector must develop a greater understanding.
In a move which appears to pull in the opposite direction to popular thinking on technology, the council is also proposing a greater focus on the importance of soft skills such as face-to-face interaction rather than a heavy reliance on robo-advice. It said: “The report identifies the importance of a soft skills approach to advice, as even in an increasingly digital age, consumers still value face-to-face contact with knowledgeable and patient industry professionals, ahead of making important financial decisions.”
Read the full report and see further proposals for improvements in the equity release sector.