LATER LIFE PLANNING
NEVER TOO LATE TO EXPLORE LATER LIFE
Richard Merrett Head of Strategic Development SimplyBiz Mortgages
The coronavirus pandemic has obviously had an immeasurable impact on all our lives , but I believe the group upon which it has most shone a spotlight is the elderly . From a health and mortality perspective , they are the ones who statistically have been at far greater risk ; there have been obvious issues and challenges for the care system , plus the impact on mental health of having to remain isolated from family and friends due to being categorised as potentially vulnerable . We have all had to adapt our way of life , but having been in the position – experienced , I ’ m sure by many of you - of having to walk parents and in-laws through how to get on a Zoom call , or hear them talk about FOGO ( fear of going out ) even after being fully vaccinated , merely emphasises the isolation and vulnerability much of this group will have felt recently . For many older people , the pandemic has changed their view on life and therefore , potentially , had a huge impact on their financial objectives ; whether that be to adapt their lifestyle , fund care , move house to be closer to family they have missed or pass a living legacy to loved ones to enable them to buy a home . There is estimated to be somewhere in region of £ 3.8 trillion ’ s worth of equity locked up in the homes of over 55s so , given this potential for a monumental shift in the mindset of a generation with regard to lifestyle and finances , is it now time to focus on how they can utilise this asset in an appropriate way to support their financial and family goals ? At SimplyBiz , we certainly believe so and we were therefore delighted to launch our ‘ Simply Later Life ’ proposition last year . Of course , this valuable proposition would have gone ahead without the pandemic but , the timing feels very appropriate given the fact later life lending can offer so many options for solutions for the changing requirements of older customers . But why is this sector of the market so important ? later life lending and , in particular , equity release has not necessarily had the greatest reputation in the past and we know that some advice firms have been reluctant to engage with this sector of the market because of a fear of regulatory risk or complaints . However , the past few years have seen the market
change considerably , products have become more flexible , rates have dropped significantly , and more and more advice firms are entering the market , particularly those who are not just traditional equity release specialists but are looking to diversify their business and expand their client offering . Figures from the Equity Release Council ( ERC ) show that 2021 was a record year for lending . By the end of September last year , equity release customers had borrowed £ 3.46bn , putting the market on track for well over £ 4bn of annual activity — a new landmark . This is not including those other products - RIO and mainstream mortgages for older borrowers - that are also excellent solutions , with a great many more flexible options and potential for positive outcomes than as little as just two years ago . For many potential customers , there are now genuine choices in the mix of products , and it is most certainly not “ equity release or bust ”. With a reported only one in five mortgage advisers active in the equity release market , many borrowers struggle for fulfilment with regard to advice , so if you are a firm that can offer the full spectrum of later life lending solutions , you may find yourself in a position where you have a clear differentiator against your peers .
To summarise some of the key drivers of the growth and longer-term potential in the market :
• The aging population .
• The changing pension landscape ; the stability and generosity of final salary pensions is all but gone , so retirees are taking a different approach to income in retirement , including using property wealth
• Shifting attitudes ; advisers can see the poor value products of the past are gone , and cheaper , more flexible , later life lending products are now available .
• Asset rich , cash poor ; many older homeowners are finding themselves short of liquid funds , but have seen tremendous growth in the value of their property .
• Redistributing wealth ; HNW homeowners may be concerned about inheritance tax . Later life lending can form part of a tax efficient plan to pass wealth down through the generations
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