Not enough is being done to educate consumers on the benefits of drawdown plans, says Dean Mirfin, group director of Key Retirement Solutions.
At the launch of the firm’s latest Equity Release Market Monitor survey last week, Mirfin warned that too many consumers are releasing their money in a lump sum, instead of drawing it down over time.
He says this could be because advisers are asking the wrong questions or because consumers are not aware of the benefits of drawdown.
Mirfin adds that although drawdown accounted for 74% of its own sales compared with the market average of 55% in 2011, it would like drawdown to represent a bigger proportion of equity release sales.
He says: “Customers using drawdown benefit from lower borrowing costs because they are able to draw funds when required. There is still work to be done to ensure they are not taking out single advance equity release when they do not have a requirement for funds all at once.”
But Vanessa Owen, head of equity release at LV=, has not seen evidence of consumers releasing money in a lump sum when drawdown would be better.
She says: “Often when people get the money in one lump sum it is for something such as a house purchase or to pay off existing debts, so it is logical that they are withdrawing the money in this way.”