We currently face a considerable challenge. It’s an emotionally charged issue, finding a solution isn’t easy and getting it right is essential. I’m talking – of course – about the social care funding crisis which, after years of debate, still ranks amongst one of the UK’s biggest domestic challenges.
It’s a well-known fact that we have an ageing population. The latest population estimates from the Office for National Statistics (ONS) show the number of people aged 65 and over will nearly double to more than 20 million by 2066 and the biggest increase will be in the over-85s age group – who are in the most need of care – which will more than treble. As these figures continue to rise, questions about how best to fund care for this age group still need answering.
It’s perhaps understandable why it’s difficult to reach decisive action when you consider the scale of the challenge ahead. However, with parliament only returning from recess today (4 September) we have had the chance to pause, reflect and regroup to consider how best to tackle this issue.
For those with inadequate pensions savings, access to finance remains a major challenge in later life, especially in a landscape of low savings rates and rising living costs. The public considers property to be second only to employer pensions as the safest way to save for retirement, and this view has strengthened since 2010, according to the latest Wealth and Assets Survey from the ONS.
One result of this changing mindset is the decision to use housing wealth as a mainstream source of retirement funding. Equity Release Council data demonstrates steady growth averaging 11% per quarter since Q1 2016 has brought the equity release market to the cusp of £1bn of lending for Q2 2018 alone.
This remains a fraction of mortgage lending activity and the market’s future potential. But already, it means over-55s have accessed 50p of housing wealth over the last year for every £1 of flexible pension payments released under ‘pension freedoms’. This is significant because it demonstrates the need for further sources of income in retirement instead of relying on pensions alone.
Making advice accessible
Competition and choice have improved to meet consumer demand – but further innovation is only part of the challenge. There is no one-size-fits-all remedy to meet retirement or care needs, so conveying the growing range of options to consumers is equally essential. Financial services can be notoriously complex, the care system even more so, and we need to add clarity rather than confusion.
More than ever, access to good quality, joined-up advice is fundamental. This point has repeatedly registered in political debate this year as we have worked hard with policymakers to make the case. The Communities and Local Government Select Committee judged within its Housing for Older People report that older consumers should be signposted to advice on equity release among the range of housing finance options in later life.
Individual voices are also recognising this logic. Crispin Blunt MP sought to amend the Financial Guidance and Claims Bill to place a duty on the Single Financial Guidance Body to make guidance available on alternative sources of retirement income – arguing that “equity release can help in meeting some of the challenges in social care”.
Even the former first secretary and government minister, who announced the Care Green Paper in 2017, Damian Green MP has also made headlines for advocating mass market use of housing wealth to meet the care challenge.
Handling advice with care
Against this backdrop, the equity release sector is helping a growing number of people – 20,326 in Q2 2018, up by 27% annually – to satisfy needs that might otherwise go unanswered. But there is no time for complacency. Making financial decisions can be difficult, particularly at a time of life when people face changing circumstances and challenges to their health and wellbeing. We cannot rest on our laurels.
As the market grows – it’s important that participants grow with it. Advisers need to stay up to speed with the latest developments, whether or not they advise on lending products directly. Customer needs vary greatly and advisers need to be aware of the bigger picture so they can help their clients by referring to an appropriate specialist.
The later life arena is constantly changing – perhaps now more than ever. From interest-served lifetime mortgages with voluntary repayment features through to retirement-interest-only mortgages, product innovation is fueling greater choice and makes it ever more important that advice is handled with care.
From discussion into action
We await the upcoming social care green paper to help move from individual discussion into collective action. Meanwhile, the Council’s team is continuing to put the miles in by visiting members and industry professionals across the country – from IFAs and mortgage brokers to conveyancers – to help get these messages across.
We hope that a social care funding solution will be in our grasp, but we cannot be complacent and must quicken our pace to achieve this. Housing wealth will play an important role and the spirit of renewal and innovation in equity release sets a good example to follow.
David Burrowes is chairman of the Equity Release Council