The ‘Later Life Lending: Great Expectations’ report, authored by Jon Dunckley, director of About Consulting Group and commissioned by the Equity Release Council (ERC), also said there should be more interaction between trade associations and professional bodies to improve referral processes.
It suggested that the discussion around homeowners’ ability to release equity from their homes to meet later life needs remains “a topic of limited discussion”. It said this could support income shortfalls, cover care costs and rebalance the gender inequality faced by women who on average have smaller private pension benefits.
The report called for the use of property wealth to be integrated into the Money and Pension Service’s (MaPS) guidance guarantee.
The Great Expectations report said the regulator should “commit to an open dialogue” with the sector in order to display the positive role of property wealth. It also suggested looking at the “regulatory divide” and continuing professional development (CPD) requirements which separate equity release and mainstream mortgages, and also restrict the recognition of property in wealth planning.
It said this limited the opportunity to look at solutions for older people in a holistic way.
Alice Watson, head of marketing communications at Canada Life UK, said although UK property wealth stood at £5trn and progress had been made to equity release products, a lack of awareness meant consumers were “considering their wealth in siloes”.
She added: “Importantly, property wealth should be thought of alongside pensions and other assets to create holistic retirement plans.”
The use of green equity release to allow people to unlock more wealth from their homes or get lower rates was also proposed.
Product development
The report said while the sector had moved on in “leaps and bounds”, more could be done to improve the later life product offering.
It suggested lowering rates and early repayment charge costs. It also called for a loosening of criteria to allow more properties and the creation of a hybrid of the retirement interest-only product and a lifetime mortgage.
The report said income products could be an area of innovation, but current legislation was “unhelpful”.
Les Pick, director of manufacturing and adviser propositions at More2Life, said it was important to look at ways to empower people to use their greatest asset for support.
He added: “We need to build on existing flexibilities, question long-held beliefs and be prepared to consider whether more automation, wider-ranging qualifications, and a focus on educating customers as well as the wider advice sector can pay dividends.
“Change is never easy but this report contains a clear view of areas where if we gain buy-in and engagement, we can support more customers with good outcomes.”
People ‘still have their eyes closed’
Dunckley said: “Despite seeing major progress on product innovation and advice standards during my 25 years in financial services, many consumers and their advisers still have their eyes closed to the potential of property wealth and later life lending products to improve their life experiences.”
He said there was scope for property wealth to address financial challenges but a more dynamic approach was needed.
“This paper channels what I have observed in working with advisers into a practical guide to deliver more opportunities for consumers to improve their financial planning. Changing people’s views will not be like flicking a light switch; it needs a concerted effort to make structural improvements and communicate a more aspirational message about the benefits of property wealth,” he added.
David Burrowes (pictured), chair of the Equity Release Council, said: “In the 20 years since residential and lifetime mortgages became formally regulated, property wealth has emerged as a major component of modern retirement planning. The UK’s ageing population needs safe and accessible later life lending products to make better later life living standards a reality.
“These recommendations will inform our work towards a future where every home can provide its owner with the opportunity to enjoy a better standard of life or give vital support to younger generations.”
