In last month’s column, I wrote about the importance of consumer education when it comes to developing the equity release market; I suggested that educating consumers about the potential benefits of taking out an equity release product was not just a job for the trade body, the Equity Release Council, but for every single practitioner and stakeholder. It remains all our responsibility to ensure that the message gets across and consumers are not walking around with false information and/or a complete lack of understanding about equity release.
- If we were in any doubts about the scale of the task facing us all then we shouldn’t be in this mindset after the release of the latest survey on consumer understanding of equity release from Aviva. Here is just a taster of the results the survey generated which should leave us under no illusion of the mountain that we have to climb:
39% of over-55s recognise the potential benefits of using their properties to release cash to fund their retirement – good news so far however:
Just 15% said they would consider equity release to do this.
Only 4% had already taken out a product.
82% said they had a good understanding of equity release however:
More than a quarter believe equity release involves selling their home and living in it rent free for the rest of their life – this of course is a home reversion plan and does not cover the definition of a lifetime mortgage.
One in five who said they will not in any circumstance take out an equity release product, are worried about losing their homes – a common misconception still regardless of the consumer education that has gone on.
Nearly half don’t want to release equity because they want to bequeath their property as part of their inheritance.
Older people are more likely to consider equity release – 16% of over-65s, compared to 12% of 55-64 year olds.
Much of the above will perhaps be common knowledge to many advisers who, I know, have to face this type of attitude and ‘understanding’ on a day to day business. But it will perhaps also come as a surprise to those within our market who believe we are somehow ‘winning the hearts and minds’ of consumers’ when it comes to educating them on the products available, their differences, and the way the market has changed which might accommodate their wishes and still allow them to take out a plan.
Now, it might be music to the ears of home reversion plan provider to hear that a large number of consumers equate equity release with reversions, however it actually serves to highlight the knowledge gap that exists. However, it is somewhat ironic to think that in a marketplace which regularly considers lifetime mortgages to be the only equity release product on offer, consumers think otherwise.
However, the challenges for our sector should be clear to all. Despite the many years of work put into the notion of consumer education, the gap is perhaps bigger than some of us would care to acknowledge. With the pension revolution due next year it may be even harder to get our message heard and clearly understood – in the tsunami of information that those reaching retirement are going to be confronted with how can the equity release sector make itself heard? Will the product be on the radar when it comes to the ‘free guidance’ that is to be dished out? Can specialist advisers position their products and services well enough to be ‘in the mix’ when it comes to consumers deciding how they are to access their pension monies, and how they might confront any potential shortfall?
These are big questions facing our sector and ones that we will need to address if we are to ensure that equity release not just maintains its positions but continues to grow as a sector and is much more widely understood by its target market. So, while we should all appreciate the education work that has been conducted by sector stakeholders over the past 10 years or so, perhaps now is time to recognise the true nature of its impact. Clearly, as we move into a more flexible retirement age we need to ensure equity release becomes a key and consistent option for retirees – I’m afraid this is certainly no time for pats on the back in terms of progress made and lending levels passed; indeed, it looks like the hard work has only just begun.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release