A policy paper, sponsored by Royal London and Responsible Life, looked at how British adults make use of housing wealth in later life and has called for changes to the equity release sector.
Recommendations have been made so that consumers have a better understanding and awareness of equity release. To ensure that their back-office systems can accommodate housing wealth as an asset when advising clients; to build housing wealth decumulation into cashflow recommendations where appropriate; advisers to increase their knowledge of equity release products and their uses; and that advisory trade bodies should take a lead in actively encouraging advisers to incorporate housing wealth and equity release into advice processes.
There is as much wealth in housing as in pensions, but while there has been a number of policy initiatives on pensions in the past 20 years, housing has been largely ignored. Where it comes to making the best use of housing wealth the Financial Conduct Authority (FCA) has a massive blind spot. Whilst it regulates equity release as a mortgage, rather than as an asset to be drawn on in retirement, and advisers are free to simply ignore it if they choose.
Consumers alike remained sceptical about equity release due to historical issues, while many consumers still have an ingrained wariness of taking on debt later in life. One adviser said that if a typical client of his ended up having to use equity release he would see it as a failure in the planning process.
Once equity release is discussed with clients and they have full understanding of the product, their confidence increases. Some clients may be looking to gift some of the value of their home to their children – usually for a house deposit. That is very different from relying on their home for an income.
One financial adviser said that the people who needed these products are not the ones who are getting advice.
A number of recommendations were also made to the government, the FCA and equity release providers. These included removing the £175,000 main residence IHT allowance and arranging a meeting between relevant government departments with industry, regulatory and consumer representatives to agree a blueprint on a well-functioning equity release market.