Dear Delia

Dear Delia I am increasingly being asked by my clients about equity release. I’m aware this subject that needs careful advice but I am confused – since Financial Services Authority regulation last year, what does equity release industry body Safe Home Income Plans offer consumers that is not covered by the FSA? Also, I am aware that not all equity release product providers are members of SHIP – why not?

Delia Say: Advisers should be looking at SHIP member schemes which offer a number of product guarentee standards. Here to help are Dean Mirfin of Key Retirement Solutions and John King of SHIP and Hodhe Equity Release.

Have you got a problem for Delia? Email mortgage.strategy@centaur.co.uk

Intermediary Response
Dean Mirfin is business development director at Key Retirement Solutions

Equity release is a tricky subject to advise on and IFAs need to make sure they understand the products and potential problems thoroughly.

One of the issues facing equity release – in common with all other aspects of the financial services industry – is regulation, and who and what it affects.

The FSA makes it clear it is not responsible for product design, which is really at the heart of the issue. SHIP’s focus has been on products and the clarity of the information that is given to clients.

SHIP is dedicated entirely to the protection of those clients who take out a member’s scheme. In addition, it is concerned with the promotion of so-called safe home income and equity release plans.

From an IFA’s perspective, the focus is on providing best advice to a client. For a product to be acceptable to SHIP it must comply with a strict structure and code of practice. This stretches to the content of its literature, the fact that a client’s legal representatives are independent to those of the lender and the fact that the scheme must have a no negative equity guarantee. It also covers the requirement for a solicitors’ certificate to be completed in each case and specifies the content of that certificate to ensure clients are aware of key details.

There are many further requirements placed upon lenders and providers that delve deeper into product design and features. The code of practice stretches far further than the requirements of mortgage regulation.

SHIP affiliation provides an adviser with the peace of mind that the product and the process adopted will follow the code. It also addresses the key concerns that many clients have including whether they have the right to live in their property for life, whether they have the option to move to another property and, ultimately, if a scheme is safe. Advisers know that if a provider is a SHIP member, these questions will be answered.

Non-members cannot necessarily answer these questions or others such as what guarantees are provided, is the literature clear and balanced, and what are the vetting processes?

It could be argued that non-member schemes could provide all these things and more but that raises the question, why are they not members of SHIP? I can’t answer this but I can say that there are some schemes that would not be granted membership as they don’t meet SHIP’s requirements – proof enough that SHIP plays an important role.

Trade Body Response
Jon King is chairman of SHIP and managing director of Hodge Equity Release

The FSA and SHIP play important and complementary roles in the equity release market and SHIP’s role is as vital now as it was before the FSA began to regulate mortgages. In the interests of consumer protection SHIP lobbied hard for mortgage regulation and also for the regulation of home reversions, which will follow. We also have a close working relationship with the FSA, taking part in its practitioner panel. And we are providing a bridge to the government regulation of home reversions with the SHIP independent complaints board for these products, launched last year.

Unfortunately, regulation does not make products good. This is where SHIP’s complementary role to the FSA comes in. All products from SHIP members come with a number of guaranteed standards, developed and built upon since SHIP’s foundation in 1991. SHIP guarantees have influenced the design of equity release products in this country and abroad, and are without doubt the reason we have such a strong equity release market today.

One of the key features is SHIP’s no negative equity guarantee, which means a client will never owe more than the value of their home. With increasing speculation about a softening property market this guarantee takes on greater significance, providing great peace of mind for clients.

In addition, the SHIP logo guarantees a client has the right to live in their property for life and that they retain the freedom to move home in the future if necessary without incurring additional financial penalties – something deemed vital by SHIP as people’s circumstances inevitably change over the years.

In all cases, SHIP providers also insist that a client obtains independent legal advice. Prior to completion of the plan, a solicitor will be provided with full details of the benefits their client will receive and the solicitor will be required to sign a document to say the scheme has been explained fully. This offers vital protection to a client and their family.

While not all equity release product providers are SHIP members, SHIP represents more than 90% of the sector by volume and members enjoy a 98% customer satisfaction rating. Those providers that are not members of SHIP either do not meet all of its standards or have chosen not to be members for reasons of their own. Only the SHIP logo guarantees all our product standards are provided.