"Many consumers and their advisers still have their eyes closed to the potential of property wealth and later life lending products"
A new independent report on the future of the later life lending market has called for coordinated action by industry, government and regulators to help consumers 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.
The report, which was commissioned by the Equity Release Council, 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: 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. The report says 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.
Jon Dunckley, report author and director of About Consulting Group, commented: “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, said: “In the twenty 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.”
Alice Watson, head of marketing communications at Canada Life UK, added: “Despite UK property wealth standing at £5trn, and major progress having been made in recent years in terms of product innovation and flexibility, a lack of awareness of the equity release market has resulted in consumers considering their wealth in siloes. Importantly, property wealth should be thought of alongside pensions and other assets to create holistic retirement plans.
“Thanks to a combination of the interest only mortgage time bomb, limited pension adequacy, pension freedoms and inheritance tax rules changing, notwithstanding a cost-of-living crisis, equity release will undoubtedly be a key component of many retirement plans in years to come – due to the fact it can provide both certainty and flexibility.
“Looking ahead, we, as an industry, need to continue to work collaboratively with both regulators and advisers to highlight the benefits of property wealth and how it can help customers meet their individual needs.”
