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Kim North: Providers must take more responsibility for ageing population

The country is ageing. Office for National Statistics figures suggest around 18.2 per cent of the UK population were aged 65 years or over at mid-2017, compared with 15.9 per cent 10 years previously. This is projected to grow to 20.7 per cent by 2027, the highest-ever level.

With this trend in mind, the provision of financial advice and products for the elderly needs to increase and improve.

There is a troubling lack of long-term care and deferred annuity products, and the equity release market needs more providers and innovation in product design.

According to the Equity Release Council, demand for the solution increased by 25 per cent from 2017 to 2018.

Lifetime mortgages constitute about a third of all mortgages taken out by homeowners from their mid-50s, releasing £3bn last year.

With Nationwide now offering it, the product is becoming more and more mainstream.

When I was advising, the reasons for recommending equity release were numerous. A reoccurring need among female clients was to pay for operations such as hip replacements. Other needs included having to replace leaking roofs or pay off expensive debt.

The Bank of England has recently cracked down on equity release providers following guidance from the Prudential Regulation Authority, raising capital requirements at lenders to strengthen balance sheets to provide a cushion in the event of a housing crash.

Equity release can be life-changing and I think it is good that many providers will take responsibility for the advice.

But what I would also like to see providers in the retirement space take responsibility for is defined benefit transfers.

The FCA confirmed in March that pension providers are not responsible for the suitability of advice in this area. Is poor equity release advice, where the client could lose their home, better than a pension transfer from a wobbly scheme or one that has fallen into the Pension Protection Fund?

A DB transfer can also be life-changing for many – again, for the better.

The problem is that Section 48 of the Pension Schemes Act 2015 requires trustees or scheme managers to check that independent advice has been taken before allowing a transfer to proceed, where it involves a DB pension or other safeguarded benefits worth more than £30,000.

It has never made sense to me that defined contribution pensioners have flexibility and freedoms that DB members do not.

There are not enough equity release or DB pension transfer advisers around that charge affordable fees for the growing elderly demographic and the complexities of their financial needs. The regulators need to widen the remit of those that can advise on elderly financial matters, and providers should take more responsibility.

Kim North is managing director at Technology & Technical



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. seonaid mackenzie 23rd April 2019 at 2:49 pm

    I think that many people especially who are divorced (ie women) do not have have large work pensions, see the Equity Release as a way to stay in their homes, but it is not explained enough, and people worry about leaving a debt to their loved ones or no equity to get on the ladder. The other thing is the interest is so much higher than normal mortgages. The Pension Release is not often enough to pay off the mortage at 65, because you have to pay tax again on the payment you get from the pension

  2. Dominic Wilkinson 24th April 2019 at 9:50 am

    I must point out that the comments made in paragraph 11 are incorrect and I would ask you to amend. To quote –

    “Is poor equity release advice, where the client could lose their home, better than a pension transfer from a wobbly scheme or one that has fallen into the Pension Protection Fund?”

    Lifetime mortgages are the most popular form of equity release. Plans offered by lenders who are members of the Equity Release Council come with built in protections where the client’s home cannot be repossessed.
    The other form of equity release (home reversion plans), have a differet structure but again the client cannot lose their home as they remain as life-long tenants.

    It is this sort of inaccuracy that does the equity release industry a great disservice and I would have hoped that either you or the editorial team at Money Marketing would have checked the facts before publishing.

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