Equity release - new research

Would you draw on the value of your home to finance a better quality of life in old age?

A new JRF report assesses three equity release pilot schemes, aimed at 'asset-rich, cash-poor' older home owners. Pilots ran for 18 months in three local authorities (London Borough of Islington, Maidstone County Council and Royal Borough of Kensington and Chelsea).

JRF’s interest in equity release goes back many years to an Older People's Inquiry into 'that bit of help'. We knew three things:

1. older people put a high value on low-level support;
2. it can be hard to get this given rising eligibility criteria;
3. large numbers of older homeowners living on low incomes had significant housing assets.

So, might equity release be a potential or partial solution for some?

We funded research into the obstacles, and then convened a Task Force to work out how to tackle them. Through this, one major equity release provider (Just Retirement) stepped forward to develop a new product enabling smaller drawdowns of money in a way that would not have an adverse impact on benefits (DWP-approved). A regulated financial adviser (Just Retirement Solutions) agreed to offer objective advice at a lower cost than usual for a pilot period. And the three local authorities agreed to pilot signposting to the new product.

As Community Care reports today, the number of enquiries was small. This partly reflects reluctance or uncertainty felt by local authority staff about promoting equity release. In contrast, a much larger number of enquiries have been made via Age UK Enterprises and First Stop Advice following the national roll-out of the Home Cash Plan in November 2010 (during the pilot period). What does this say about how to achieve relevant financial advice and information about ageing, planning, care and support?

There are continuing uncertainties about equity release generally – despite heavy regulation and clear codes of conduct led by SHIP (the equity release trade body). But there are also signs that perceptions are changing – with analysis reported yesterday by Key Retirement Solutions of the first growth in the equity release market for four years.

Of interest, trends in use of equity release are:

1. home improvements;
2. debt consolidation;
3. holidays.

They are not yet used to pay for low-level support or for care.

So, is the Home Cash Plan a commercially viable product albeit with a limited market? Or a financial product that is ahead of its time?

One last word: to thank all those who led, delivered and supported the pilots in the local authorities and the equity release industry - for foresight, leadership, and readiness to share learning openly through this JRF-funded study.