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Aviva, LV= and Just Retirement say they are committed to equity release

Aviva, LV=, Just Retirement, Hodge, Home & Capital and Stonehaven have all insisted they will not be following Prudential out of the equity release market.

Money Marketing revealed yesterday that Prudential plans to stop offering lifetime mortgages in the first quarter of next year as it believes the upfront capital required to write new business would be better used in other product areas.

Prudential is the latest in a long line of equity release providers to pull out of the market, leaving Aviva, Just Retirement, and LV= as the only substantial players still writing new business in the sector.

The move follows Northern Rock, Saffron Building Society, Coventry Building Society and Retirement Plus who have all suspended new lending over recent months or closed to equity release business completely, while In Retirement Services went into administration earlier in the year.

But Just Retirement says it has no plans to follow suit.

In a statement it says: “While we acknowledge its reasons for exiting, Just Retirement can categorically state that they have no bearing on our position or strategy within equity release.

“Just Retirement remains fully committed to this market for both its profitability and long term growth characteristics.”

LV= head of equity release Vanessa Owen says: “We’re a little surprised at the Prudential’s move and believe it could turn out to be a missed opportunity for them. We see this market as a growth area and LV= is still committed to offering equity release, as part of a range of flexible retirement solutions propositions.”

Aviva director of annuity business and equity release Clive Bolton adds: “While Prudential may have decided to leave the equity release market, Aviva is fully committed to growing its share of
exciting sector.”

Home & Capital managing director Simon Little says: “Home & Capital confidently expects to be part of this market for many years to come and play a full part in the opportunities that it will offer. In the meantime we are expecting a number of new providers to join the market, which is now ripe with opportunity.”

Stonehaven and Hodge have also confirmed their commitment to the sector.

Hodge managing director Jon King says: “We were in the market a long time before Prudential and we will be there for a long time after.”

Stonehaven Equity Release chief executive Jayne Almond says: “We are disappointed that Prudential is pulling out, but that is for very specific reasons. We are backed by a major bank and which enables us to fund new lending.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. There is definitely a need for Equity Release products in the current market & I can only see demand increasing in the future as clients rely upon their assets to provide them with a reasonable standard of living in retirement.
    Is this a short term issue caused by a lack of funding or does it have longer term implications? In “laymans terms” is it simply that the rewards associated with Equity release no longer exceed the risk? Perhaps an expert in this area could offer an opinion?

  2. It is interesting when you look at the points covered by Pru’s statement on ceasing to be involved in the sector. They do not refer to profitability. Pru arenot only a product provider but also have their own salesforce tied to Pru. Cost of aquisition and tieing up cash for long periods were the main reasons stated for withdrawing.

    In relation to risk v reward it is more about prioirties. The rewards within the sector can and are substantial but not for short term strategies as a funder. Those who want to be involved for the long term, such as Just Retirement, are clearly able to gain the rewards they seek from the sector.

  3. I think the issue here is securitisation of the loans, Pru seem to be saying that the amount required to be put aside in order to do this could be better used elsewhere.

    Different companies securitise these loans in different ways, JR and Aviva for example will securitise against their annuity books which is a symbiotic relationship. Pru’s model may be secured in a different way, which has obviously become unworkable in the current climate.

    An issue unique to Pru is their increasing drawdown fund; maybe the complexities of funding this have caused the withdrawal.

    Whatever the reason, the withdrawal of such a well known name from the sector can only be a bad thing.

  4. These products are falling away faster than the FSA can make a licence and an exam a requirement of their sale!

    Maybe we would be better regulated if the FSA had been putting their focus on Macro regulation rather that box ticking TCF?

  5. This is definitely an opportunity for those committed to the market. For advisers who do the odd case now and again, the market now looks completely different to how it did back in January. Therefore, it’s vital they refer cases to a specialist who understands what is happening. Secondly, an opportunity for new providers to come into the market. The demographics aren’t going to change, there is still a need to supply a solution, and someone will fill that void.
    I expect SHIP are out there right now, negotiating to find new providers.

  6. There is absolutely no necessity for advisers who do not specialise in ER to stop doing the cases that come their way and refer them to specialists. If you have the qualification SHIP requires and you maintain an ER file keeping abreast of developments you should have no problems. If you are an ER “specialist” I would have thought the chances of mis-selling were higher; after all if you don’t sell ER you don’t earn…

  7. They are the Pru not Prudent.
    Although I largely agree with Dean my expectation is that the Pru have a new get rich quick scheme they need the cash for and they will announce it shortly. They will then spend loads of money on it and will pull out of the new market shortly after making more people redundant. Yes I am a former Pru victim of one of their get rich quick scheme.
    As for the anonymous individual above who thinks he is up to date with the market I am sure I will get the opportunity of fixing his excellent work at some point.

  8. They should be committed more like!

  9. I think Anonymous should realise that you don’t “sell” ER, clients BUY it.

    If a specialist provider has access to better products/lower rates/better service (aargueably), surely that is better for the client?

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