While everyone – often for a variety of different reasons – has found that the Covid-19 pandemic has impacted them, some age groups are arguably more impacted than others. The Centre for Aging Better suggests that a fifth of people in their 50s or 60s have seen their physical health deteriorate during the coronavirus crisis, and over a third say their mental health has worsened.
They may have also seen a financial impact, either watching their savings rates plummet and their pension pots shrink or finding that they have been furloughed or made redundant. It hasn’t been easy – especially for this age group who while not necessarily vulnerable are more likely to be vulnerable. In 2017, the FCA estimated that half of UK adults (25.6m) showed signs of potential vulnerability. Three years on with the nation grappling with a pandemic, this number is likely to be a lot higher.
Inevitably, any change in circumstance regardless of what it is and when it occurs is going to result in uncertainty – especially for older consumers who may have a fixed income or be in the final years of saving before retirement. Advisers are well placed to take a holistic view of a client’s finances and individual circumstances and guide them to a solution that’s right for them.
One option that can be considered is how you use your housing equity in retirement – be it downsizing, equity release or taking out a later life mortgage. However, it is vital that people do not make ‘knee jerk’ decisions and consider how any choices impact both their long-term and short-term financial situation.
Unlike the residential mortgage market, which has seen a flurry of lenders forced to pull products over recent months, the lifetime mortgage market has remained ‘open for business’ in terms of product choice. Indeed, the number of plans available increased by almost 50% in the space of 12 months, rising from 221 in January 2019 to 313 the following year.
With the broad range of options and peoples’ needs shifting as a result of Covid-19, it is vital that older homeowners speak to an adviser to consider their options. Specialists can help customers understand what products will best suit their needs including considering the different modern lending features offered with various products. For example with equity release, inheritance protection, drawdown facilities and options to repay capital, are all features that can be used to manage borrowing.
The type and value of an equity release loan will also depend on a customer’s specific plans for retirement. For example, a client who is unable to work due to illness may find that taking out a lump sum to repay their mortgage might improve their financial circumstances as well as reduce the amount of stress that they are under. While more customers are likely to have short-term, immediate costs to meet during the crisis, it is equally crucial that advisers consider a client’s long-term financial commitments during the advice process.
As part of this consideration, the Equity Release Council suggests that advisers encourage people to involve their families or the adviser clearly highlights why this is not the case in the documentation. Over-55s are quite obviously responsible for their own finances but given that it is often the family home and there may be inheritance implications, family involvement is important. Indeed, many families are keen to see older relatives enjoying a better quality of life in retirement but want the added reassurance of knowing that their parents have considered all their options.
As the current crisis progresses, it will be crucial that lenders, trade bodies and other key players in the equity release market provide advisers with the tools and resources they need to promote responsible lending. Advisers are essential in safeguarding customers and identifying what the correct option is for their circumstances, both now and in the future. However, only by working together will we be able to support advisers in their conversations with customers and ensure that more are able to secure the outcomes that their clients deserve.
Stuart Wilson is corporate marketing director, more2life