He also noted that there were several significant obstacles that would stop equity release being the solution to fears that people would not have enough retirement income.
Speaking at the Equity Release Summit, Webb, who is now partner at Lane Clark and Peacock, was discussing his experience of how equity release and other retirement and pension planning was currently advised.
“At Royal London I would talk to retirement and pension advisers and they would say, ‘No I don’t do equity release – on the rare occasion I think someone needs to think about equity release I send them to someone else’,” he said.
“That’s ridiculous. The idea you don’t go and see a holistic financial adviser who understands the mix, the role of different products, and think of all of this in one place.
“If I were the FCA, I would ban advisers who don’t do holistic financial advice. How can you give the right advice if you’re not thinking about a range of solutions and range of products? I think that would fix it very quickly.”
Webb continued: “We’ve got to get the [advice] structures right. Make sure the person who is sitting opposite you is aligned with your interests, what they’ve said is right for you not just right for them, and that they are looking at the breadth of product not just the things they happen to know about.”
Major regulatory change
Key Group CEO Simon Thompson agreed that bringing pensions and other retirement planning advice together with equity release advice was a “very nice ambition” but that it is a long way off.
He suggested the more immediate and necessary steps involved bringing the later life lending advice sector together because its rapid evolution.
“New products like retirement interest-only (RIOs) are in a different regulatory regime, there are different advice standards – how do you harmonise those and traditional retirement mortgages with equity release for example?” he said.
“There’s a large amount of work that needs to be done around standards, communications, proper referral pathways and proper educational awareness – that’s got to be a first step.
“I would love to then think about how we truly give holistic advice across the pensions piece. But it needs major regulatory change before we’d feel comfortable putting our advisers in front of customers talking about the whole piece,” he added.
Equity release not the answer
Webb also discussed why he did not believe equity release felt like the answer to the pensions crisis yet – but acknowledged it did have potential and it was more viable than downsizing.
“We don’t think enough in the equity release market about the housing wealth that millions of us are going to inherit at just the right time,” he said.
The key points Webb highlighted included:
- Most equity release money is used for capital purposes such as home improvements, garden improvements. People are not using products for income. “To be the solution to the pension crisis would need a different mindset.”
- The median age for purchasing an equity release product is currently the early 70s. For retirement income, people want that sooner, closer to state pension age.
- As a result of compound interest, people are only able to tap into a small proportion of their housing wealth than they might have assumed.
- People with poor pensions have lower equity in house and people with larger pensions tend to have high housing equity. There may be a exceptions such as the council house buyers of the 1980s who on average will tend to have retired a bit poorer, but will have seen massive house price increases.
- The bequest motive will be important for a very long time. The motivation to take money out of a house to spend on the personal standard of living is limited, but there will be more lifetime giving such as people delaying paying off their mortgage to see their children enjoy it.