Equity release review

The far future of equity release

Andrea Rozario

chief corporate officer, Bower

It’s been an odd couple of years. Never again (I hope) will we all experience such stress, tedium, and anxiety simultaneously. Two years on, and changes from the lockdown launching, and it seems like we are finally heading back into normal times. Masks seem to be a novelty again, and after numerous false dawns it feels like life, and indeed business, are back – for good, one hopes.

For my corner of the mortgage trade – equity release – the lockdown was a time of consolidation. After a number of years of really impressive growth, coronavirus threatened to knock us back. However, in reality, the market has stayed steady, and this year started like a train. In Q1 of 2022, £1.4bn was released, a very healthy 30 per cent hike from the year before, and the market seems to be cruising toward cracking £5bn released annually for the first time.1

But what’s the bigger picture? Growth is key to any market, especially one that is, admittedly, a smaller piece of a much larger pie, but it can never be the be-all and end-all. The main thing for market success is to focus on the future – not just one year at a time, but the distant future. How will equity release be placed in many decades’ time? How will we be helping older homeowners in the future realise the retirement they deserve?

The answer is to bin shorttermism. Equity release is here to stay, so we should act like it. In fact, looking forward cements our place as a retirement solution of the future. In truth, the retirement environment is set to change dramatically. Everybody knows that the country is greying – but do you know how much? Apparently, around one per cent of people born in 1908 lived to 100 years old; but as many as a third of people born in 2012 will hit triple digits.2 With so many more elderly people around, new retirement finance solutions will be essential. And equity release will have a role to play – I am quite sure of that.

So what are the big-picture issues we can focus on now to ensure our industry will be well placed to service the retirees of the future? Well, first is customer protection. If we look after the customers of today, it will inevitably be easier to handle those of tomorrow. Customer protection should be at the heart of everything we have done, are doing, and will do in the future. And we are demonstrating that more and more. The recent Equity Release Council announcement of another consumer standard – namely, the right of every customer to make penalty-free partial repayments on every council-backed lifetime mortgage – is another step in the right direction. But let’s make strides now so that steps in the future will be far easier. M I

*1 https://www.mortgagefinancegazette. com/lending-news/equity-release/ value-equity-release-hit-newrecord-q1-rising-30-5-key-laterlife-25-05-2022/#:~:text=In%20 Q1%202022%2C%20customers%20 could,compared%20to%2010%20years%20ago. 2 https://21stcenturychallenges.org/ britains-greying-population/

We need to talk about care

Alice Watson

head of marketing, insurance, Canada Life

Requiring social care in later life is often a difficult and intensely personal decision for an individual or family unit to make. All too often this decision is brushed under the carpet for as long as possible, which can sometimes limit the opportunities available when it comes to care decisions. By approaching the subject with your clients or loved ones as early as possible, wheels can be put in motion that can let your clients continue enjoying their retirement with peace of mind and security.

It is concerning that Canada Life research1 has discovered that more than 70 per cent of over 60s have given no thought to planning for later-life care, despite the fact that demand for such care is on the rise. This is evidenced by analysis from the King’s Fund, which found that in 2019/20 1.9 million people had requested support from their councils, an increase of over 100,000 when compared to 2015/16.2

It may not be an easy subject to bring up with your client, but it could be essential in driving a tricky question to the surface. Looking back at Canada Life’s research, we know that people are putting off the conversation; in fact, more than twofifths (44 per cent) of respondents said they would not think about care until either they or a family member gets ill, while more than a quarter (28 per cent) have put off thinking about care because it is emotionally overwhelming. Additionally, a quarter (25 per cent) have put off thinking about care because of the financial anxiety surrounding it.

Among those who have thought about care, half (49 per cent) have discussed it with family members, followed by a little over a quarter (27 per cent) who are actively saving and building up investments to pay for it, and 17 per cent who are cutting unnecessary spending to try to afford it.

Of course, care in older age doesn’t always have to mean a residential care home. There are many options available to provide varying levels of support when or if the time comes, and research shows these are much more popular with the over 60s. A fifth of respondents would opt for a move into assisted living, and a further 19 per cent would downsize to a smaller property. Sixteen per cent would rather pay for one-on-one care at home. For some families, releasing equity from their property could help them to finance these additional measures or to make necessary modifications to the family home, such as installing a stairlift or an emergency alarm system.

The wealth tied up in property can help to ensure independence and life satisfaction in later years. As advisers and providers, it is our responsibility to design products that support this and empower our customers to feel like they can make decisions out of love rather than necessity. M I

*1 Research conducted by Opinium among 2000 UK adults between 20-24 May 2022 2 https://www.kingsfund.org.uk/audiovideo/key-facts-figures-adult-social-care