The Equity Release Council has produced a new guide to help consumers better understand and compare fees and charges across different equity release products.
The guide sets out a consistent way of describing fees and charges throughout the customer journey using clear, simple and standardised language that is easy to understand. Its content has been informed by a working group made up of Council members included advisers, providers and legal experts.
All equity release firms are being encouraged to adopt the language outlined in the guide when describing fees and charges, to make it easier for consumers to compare between products and their associated costs.
The guide outlines the recommended language for all fees and charges, though not all customers will be subject to every charge listed when taking out an equity release product. The guide will also be available to consumers via www.equityreleasecouncil.com/consumers
The aim of the guidance is to support better consumer understanding which is one of the key objectives of the Financial Conduct Authority (FCA)’s Consumer Duty. The guidance also takes account of the recommendations of the Financial Services Consumer Panel which called for “standardised disclosures of fees and charges”.
Current FCA rules require all fees and costs to be clearly outlined to customers before and during the application process. Council standards also ensure all customers receive independent legal advice, alongside regulated financial advice, to ensure they understand the costs, risks and benefits associated with equity release.
The Council is the representative body for the equity release sector with more than 750 member firms, including many household names. It ensures high levels of consumer protection by setting authoritative standards that go beyond statutory regulation.
Equity release allows older homeowners to access the wealth in their homes while remaining there until they pass away or move into long-term care, without having to make regular repayments. Some 90,000 consumers took out £6.2bn in 2022 via Council members, each backed by robust safeguards that ensure rates are fixed or capped for life at the point of withdrawal without ever facing the risk of repossession.
Since March 2022, all new customers who took out plans that meet the Council’s standards can make voluntary penalty-free repayments, which can prevent the interest from compounding and enable people to pay down the capital.
Jim Boyd, CEO at the Equity Release Council, said: “When people take out any new financial services product such as equity release, they often face a few unfamiliar terms and definitions. Each firm often uses slightly different language which makes it harder for consumers to quickly identify how product fees differ and can be challenging when comparing costs.
“The Council’s guidance describes all the fees and charges that could be relevant to an equity release application, depending on its complexity. Our aim is to establish a set of standard definitions to help consumers to understand their options as they explore the equity release process with a regulated adviser.
“We understand adopting changes takes time, but the arrival of the Consumer Duty is a chance for industry to take stock and move towards a standardised approach. We hope all firms will take this guidance on board when they next revisit their approach, so it becomes the standard across the equity release market.”
Stephen Lowe, group communications director at retirement specialist Just Group, added: “Just Group led the Council working Group that resulted in this theme being developed so we welcome the Council’s announcement to standardise fees and charges definitions.
“Just has strong credentials in championing shopping around across the wider retail market so we’re pleased to help empower customers in this way. We wanted to remove barriers that can make it difficult for people to shop around and make comparisons between providers. This work to encourage firms to use common language around costs and charges will make it easier for consumers when they shop around.
“We train our colleagues across Just Group how to prepare clear communications that meet the standards set out by the Plain English Campaign. We’re in an enviable position of achieving Platinum status from the Plain English Campaign for the work we’ve done to across the company to secure the highest standards of communication with our customers.
“This investment in our teams together with initiatives such as those announced today will help Just and other firms to meet the standards of behaviour set out by the FCA in the Consumer Duty requirements.”
