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