A new independent report commissioned by the Equity Release Council on the future of the later life lending market has called for coordinated action by industry, government and regulators to help consumers plan ahead to enjoy better retirement living standards.
The report, Later Life Lending: Great Expectations, sets out the potential role of the UK’s £5trn property wealth in addressing major societal challenges facing the UK’s ageing population.
These challenges include reducing retirement income shortfalls, funding social care costs, enabling the intergenerational transfer of wealth, bridging the gender pension gap and improving the energy efficiency of homes to meet net zero targets.
Authored by Jon Dunckley, director of About Consulting Group, the report draws on his 25 years of experience and technical expertise in equity release and later life lending, pensions, tax and protection to assess the challenges facing the sector to build on the transformational changes of recent years.
The report outlines 21 recommendations in four key areas – spanning government policy, regulation, industry and consumer education – for later life lending products to fulfil their potential and support good outcomes as a central pillar of modern retirement planning:
- Set the path from the top: Homeowners’ ability to unlock property wealth to meet their later life needs remains a topic of limited discussion. The report calls on government to create a narrative of opportunity that empowers people to take advantage of all their wealth and assets, and tackle legislative barriers preventing them doing so, including inheritance tax and benefit rules. It also calls for property to be integrated within the Money and Pension Service’s (MaPS) guidance guarantee.
- Revisit regulation: The report urges the regulator to commit to an open dialogue with the sector to showcase the positive role property wealth can play in later life finance. It also argues in favour of addressing the regulatory divide and differing CPD requirements which separate the equity release and mortgage markets and also restrict recognition of property within wealth planning . This embeds a ‘silo’ mentality and prevents better rounded conversations to identify the best solutions for consumers.
- Create the experience: In the industry arena, the report calls for updated adviser exams based on new Approved Examination (ApEx) standards and for greater collaboration between trade associations and professional bodies to create stronger referral processes between later life mortgage advisers and other specialist advisers from pensions to wealth advisers. It also challenges the Council and product providers to build on the standards and flexibilities underpinning modern equity release products, while taking inspiration from open banking and wealth planning to make better use of technology.
- Raise awareness: Finally, the report outlines the case for a joined-up, cross-sector communications strategy to help consumers make informed decisions about the role of property wealth and later life lending products in their retirement plans. This includes actively demonstrating the positive benefits that the right advice and product at the right time can deliver to improve people’s experiences of later life.
Alongside the report, the Council has published a positioning paper setting out its current priorities and work-in-progress to support consumers.
The publication follows a milestone year in 2022 when a record 93,421 homeowners aged 55 or older used new or existing lifetime mortgages to withdraw £6.2bn of property wealth to meet daily living expenses, make aspirational purchases or provide financial support to loved ones.
The Council’s membership surpassed 750 member firms with the arrival of global names such as Deloitte, EY and WTW, while the launch of its fifth product standard has made voluntary penalty-free partial repayments available to all new customers since 28 March 2022 to help reduce their later life borrowing costs.
Dunckley said: “Despite seeing major progress on product innovation and advice standards during my 25 years in financial services, many consumers and their advisers still have their eyes closed to the potential of property wealth and later life lending products to improve their life experiences.
“There is huge scope for property wealth to offer real solutions to today’s financial challenges on an individual and societal level. For that to happen we need to develop a more joined-up approach, from government to regulators and advisers.
“This paper channels what I have observed in working with advisers into a practical guide to deliver more opportunities for consumers to improve their financial planning. Changing people’s views will not be like flicking a light switch; it needs a concerted effort to make structural improvements and communicate a more aspirational message about the benefits of property wealth.”
David Burrowes, chair of the Equity Release Council, added: “In the 20 years since residential and lifetime mortgages became formally regulated, property wealth has emerged as a major component of modern retirement planning. The UK’s ageing population needs safe and accessible later life lending products to make better later life living standards a reality.
“This report provides essential, and most importantly, objective clarity on the challenges to build on the flexibility and product innovation that has emerged over the last decade. The social benefits of accessing property wealth are beyond doubt, but as this report shows, there are still multiple barriers to overcome.
“The Council is dedicated to working with members, industry, policymakers and the regulator on coherent, consumer-focused solutions so the later life lending market can fulfil its potential. Greater coordination and collaboration across political, regulatory and industry stakeholders are essential.
These recommendations will inform our work towards a future where every home can provide its owner with the opportunity to enjoy a better standard of life or give vital support to younger generations.”
