A new report is calling for more government support for equity release, explains Peter Welch, head of sales and distribution at Bridgewater Equity Release
Bridgewater has long campaigned for increased government involvement and support of the equity release sector and the Parliamentary launch of a report published by The Smith Institute recently is certainly a step in the right direction.
The report – of which Bridgewater is a sponsor and helped put together – discusses the prospects for equity release in helping both older and younger people the barriers to growth new incentives changing attitudes towards inheritance the relationship with state benefits and, perhaps most importantly, the role of central government and politicians. We are always conscious of engaging with all stakeholders within the equity release community, but the sector really does need to increase its profile in the eyes and minds of policy makers in Westminster.
I could talk all day about why I feel there has been a lack of engagement with equity release up to this point, but the crux of the matter involves a lack of understanding about the solutions equity release can provide alongside an over-simplification of the usefulness of the various products by certain quarters of the press. Viewing equity release in isolation as just a way of clearing debt dramatically undersells our industry and fails to acknowledge other key issues such as a lack of income in retirement.
Politicians can’t be expected to be a master of all the trades they come in to contact with, but if their views on equity release are shaped by misinformation espousing a one-dimensional view, then it is little wonder the sector doesn’t get the support it deserves from those working the carpeted corridors of power.
This lack of state backing is all the more baffling when you consider the wider economic backdrop of dwindling pension contributions, an undersupply of housing solutions for the elderly and the general squeeze on affordability caused by the global financial crisis. Not forgetting of course how we set about paying for the long-term care needs of our ageing population in the years ahead.
An increasing number of retired individuals are now finding themselves with significant amounts of debt to service despite the fact they are sitting on significant amounts of equity within their homes. Taking away the stigma of using one’s equity to fund retirement living is a slow process however we anticipate it will be a growing option for many. By replacing debts with an equity release solution with no repayments, it is possible to significantly increase customers’ monthly disposable income as the original debt no longer needs to be serviced. For many retired borrowers on fixed incomes, the cost of their debt can be as high as between 30% and 50% of their monthly income, so utilising housing equity can make life-altering increases to net income.
The blame for the equity release market’s failure in kicking onto the next level doesn’t lie solely at the door of the government, but hopefully publication of The Smith Institute’s report will go some way towards enhancing awareness and support from our politicians.
Advisers can also help push the perception of the sector forward too and hopefully the Retail Distribution Review (RDR) will increase the possibility of advisers and retirement planners actually considering equity release during the advice process. After all, to truly do the best by the client they should be exploring all possible avenues and not just dismissing areas they haven’t previously engaged with.
If the point of the RDR is to ensure that customers are receiving the best possible advice unhindered by any potential provider and remuneration bias, then overlooking what is likely to be your client’s biggest asset and the capital tied up therein seems to be remiss. This isn’t to suggest that equity release will be a suitable solution in every instance, but not considering it is an acute oversight on the adviser’s part.
And therefore to borrow (and slightly adapt) a famous quote, advisers and the government should be asking not just what equity release can do for them, but what they can do for equity release.