At the heart of the paper, Facing The Future, Redefining Equity Release to Meet Today’s Social and Economic Challenges, is a new theory which claims that there is no longer one type of equity-release customer but many.
Those turning to equity-release products are becoming more diverse in their needs and circumstances and are putting their property equity to a much wider set of uses than before, including funding care, tax and estate planning or enhancing their lifestyle.
Yet Ship is concerned that while the current regulated equity-release sector is doing much to respond to these trends, there are some serious constraints. Indeed, market weaknesses are restricting the sec- tor’s capacity to adapt products, advice processes, compliance regimes and pricing to fully meet these emerging needs.
Ship’s paper suggests possible customers for equity release may fall into six categories.
Customer 1: Has long-term care needs and ineligible for state-funded care due to the value of their assets. Faced with choice of moving into residential care or paying for care at home.
Customer 2: Vulnerable, older, on a very low income and with no other assets. Possibly in debt. Have an absolute need for equity release.
Customer 3: Older, low-income customer with no other meaningful assets and living costs becoming a burden, equity release would improve the quality of their lives.
Customer 4: Newly retired and wants to maintain living standards. Although they may have adequate pension provisions, they have very high expectations of their retirement.
Customer 5: Aspirational client has a good pension and range of assets other than their home but wants lifestyle improvements.
Customer 6: Higher earner with a large asset portfolio sees the benefits of a strategic use of ER for tax and estate planning, based on financial advice.
Ship would like to change the opinion held by many advisers that equity release is primarily suitable for customers with low incomes and encourage advisers to consider equity release as a key weapon in their retirement planning armoury.