There are signs that home equity withdrawal is now being taken ever more seriously by policymakers grappling with the consequences of an ageing population and pensioner poverty. An influential committee of Peers has now highlighted the need for property-owning pensioners to unlock wealth in the home rather than try to push costs on to future generations.
Politicians have been endorsing the need for people to save more in pensions for many years, but there has been scant support in the past for equity release as a solution to many of the same problems.
That looks to be changing. A House of Lords committee investigating demographic change has joined the debate with its report Ready for Ageing?.
While acknowledging people’s emotional attachment to their homes, 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 house wealth.”
It goes on to say: “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.”
Intermediaries seeking to position their businesses to benefit from new opportunities will be taking note of the real momentum building behind equity release. Many of us have been busy in recent years gathering and placing evidence in front of key decision-makers so they better understand the solutions.
Last year, we undertook the largest consumer survey of attitudes towards equity release and found a significant level of interest among older homeowners equal to hundreds of thousands of the 7.5 million pensioner households. A follow-up study in conjunction with independent consultancy Oxford Economics looking at pensioner poverty found that equity release has the potential to raise the living standards of many hundreds of thousands of pensioners who are struggling on low incomes but who qualify for few, if any, benefits.
This work along with many other reports and studies is helping to shape policy towards retirees, a particularly busy area at present given recent and planned reforms to pensions and social care which are seeking to relieve some of the burden on the State.
One key point about equity release is that one of the obstacles to greater take-up is seen as a lack of confidence among consumers. The Lords report highlights the need for more action. “Because there is an urgent need for greater consumer confidence in the equity release industry, we propose that the Government should work with the financial services industry to encourage the growth of a safe and easy-to-understand equity release market.”
There is a clear need for politicians’ support and endorsement of equity release as a solution. While the industry can create new equity release products – indeed it has in recent years with innovations such as drawdown plans – people will only buy them if they understand their financial responsibilities going forward and are encouraged to take action to meet their obligations.
Government does need to help reinforce consumer confidence and that includes highlighting the benefits of professional financial advice. Equity release is a complex area because it requires those advisers dealing with older and therefore more vulnerable clients to take into account a wide variety of factors including income needs, inheritance, tax, benefits and social care.
Policymakers need to exhibit the same joined-up thinking while doing what they can to support the role of intermediaries – both specialists and general practitioners – who are the main access point to the market and the best safeguard against future problems.
Many of the building blocks for market growth are already in place and demand from ‘asset rich, income poor’ pensioners is growing. The Equity Release Council has put the need to build consumer confidence at the heart of its strict codes for providers to give clients peace of mind, for example, that they will never be asked to repay more than the value of the home. Providers are creating plans with features and flexibility to meet diverse and changing needs.
Home ownership rates are high among older people and property makes up a large proportion of the wealth of many pensioners. Rising property prices have been kind to the generation now heading into retirement and they will need all the help they can get to deploy that wealth wisely in the years ahead.