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Think tank should think again on advice

The Institute for Public Policy Research is one of Labour’s favourite think tanks and is pretty savvy when it comes to media management.

That is why it chose the recent bank holiday to release its report Housing wealth: First timers to old timers. Public holidays have plenty of airtime to fill and precious little news to fill it.

The report calls on the government to provide free financial advice for pensioners “to help them decide whether to sell their homes” as the Pensions White Paper “failed to address the issue”. To be fair, the research is a lot deeper than a press release can hope to portray but is it really news that there are asset-rich, income-poor pensioners?

The IPPR tells us that “many look to their home to provide income in retirement”. One-fifth of retired people living in poverty own more than 100,000 of housing wealth. Some 440,000 retired people own an average of 177,000 of housing wealth, or 77bn in total.

The IPPR proposals include establishing a generic financial advice service – MoneyDoctor – to cater for old people. This service should have strong independent branding.

The IPPR suggests that the advice service “could be augmented by providing the infrastructure for pro bono work by independent financial advisers and by encouraging contributions from firms who would benefit from reducing public distrust of equity release”. The scheme would “only” cost 7m, thanks to the pro bono work.

MoneyDoctor could also include financial health checks at retirement, including looking at housing options and making clear the benefits of moving early. There should be a free, online benefits calculator for pensioners so they can see the effects of increasing their income or capital on their state benefits.

The IPPR also calls on the government to undertake an annual mystery shopping exercise among brokers offering advice on equity release. This would act as “a deterrent to advisers who may be cutting corners, and provide regular snapshots on the quality of advice”.

While it is true that many see their home as part of the solution to funding their retirement income, Lord Turner dismissed using property to bolster pensions. His interim report concluded that home ownership does not provide “a sufficient solution to the problem of pension provision given (i) uncertainty over future house prices; (ii) other potential claims on housing wealth such as long-term care; (iii) the fact that housing wealth is not significantly higher among those with least pension rights”.

Equity release customers need good advice but it is debatable whether it should be down to tax payers to fund this. And while pro bono advice should be encouraged, private firms should not have to shoulder the cost of a national scheme.


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