The House of Lords select committee on public service and demographic change has today published a report on the challenges an ageing population presents to policymakers, financial services and society.
The committee’s report argues it would be unfair to force younger people to pay for the ageing costs of an older generation which has benefited from rising property prices.
It says encouraging equity release would help “address the current imbalance” between generations.
The report also points to the evidence submission of Treasury deputy chief economic adviser James Richardson, who told the committee the existing equity release market is failing.
The report says: “It is reasonable to expect those who have benefited from the property boom to support their own longer lives. We suggest that one way to address the current imbalance would be for more older people to consider unlocking housing wealth.
“Equity release could enable more people to use their assets to help pay for the cost of their social care, to adapt their homes, and to support their incomes.
“While equity release might impact on the inheritance of the children of wealthier parents and on people in areas where house values have increased most, older age still needs to be paid for.
“The committee considers that it is right for those who have benefited from windfall gains to contribute to the costs of their longer lives through equity release, rather than for the full costs to be pushed to future generations.”
The committee wants the Government to work with the financial services industry to deliver a “safe and easy to understand” equity release market.
It says this could be achieved by placing more emphasis on communicating the importance of equity release for paying later life costs and promoting “reliable” equity release products that offer ‘no negative equity guarantees’.
The report also warns the current defined-contribution market is “not fit for purpose” for anyone who is not rich and urges the pensions industry and employers to tackle the “lack of certainty” in DC schemes.
Equity Release Council chairman Nigel Waterson says: “Today’s report is right to highlight the degree of challenge facing Government and wider society to support our ageing population. With many people having insufficient savings and pensions to live comfortably in later life, we fully support the central conclusion that making use of their housing assets will be essential to bridge the gap and avert a potential crisis.
“Since 1992, over 290,000 consumers have benefitted from equity release products, drawing on almost £12bn of housing wealth in total to meet a diverse range of needs, including boosting their income, meeting care costs, making home improvements or paying off debt.”